Nvidia’s CEO Is Confident Oracle Will Be ‘Wonderfully Profitable.’ Should You Buy ORCL Stock Now?

Oracle’s (ORCL) Q1 earnings report last month impressed everyone. The company’s $300 OpenAI deal and contracts with major companies are driving a new wave of growth, one that has even impressed Jensen Huang. The Nvidia (NVDA) boss referred to the company as “wonderfully profitable,” a strange remark considering the very business he is doing with Oracle is an extremely low-margin one. The Oracle Cloud Infrastructure (OCI) service is facing criticism because of the extremely low (14%) gross margins of the service that runs on Nvidia-supplied GPUs. This has also brought down the company’s overall gross margins to 69.66%, compared to the 5-year average of 75.45%. Should that worry investors?

Oracle sits on the cusp of an incredible AI opportunity. Even the management called it an “approaching tsunami” on the recent earnings call, saying not everyone is grasping the extent of the opportunity. Oracle is slowly transitioning to a major AI infrastructure company from a database company. The Q1 earnings were just a glimpse of what’s to come, and Jensen's positive comments only add to what the management and Wall Street are already claiming.