Larry Ellison owns 42% of Oracle (NYSE: ORCL)a $465 billion tech giant that is building some of the most powerful data centers for artificial intelligence (AI) development.
Nvidia (NASDAQ: NVDA) Oracle and most other tech companies supply data center chips called graphics processing units (GPUs). Nvidia has seen its revenues soar over the past year, and demand for GPUs continues to outstrip supply. But some investors have begun to question how much longer Oracle and its peers can pour billions of dollars into the chip giant to fuel its artificial intelligence aspirations.
Concern that the AI train is starting to lose steam is one of the main reasons Nvidia stock is down 14.5% from its all-time high. But the market may not have heard Ellison’s comments this month at Oracle’s financial analysts meeting that suggest more fantastic news for Nvidia investors.
Oracle is far from meeting its AI infrastructure goals
Oracle data centers are unique because they are automated. They are all operationally identical regardless of size, and because they do not require human workers, the company can build them quickly. Additionally, Oracle's Random Direct Memory Access (RDMA) GPU Networking technology allows data to flow from one point to another more quickly than traditional Ethernet networks.
Since most AI developers pay for processing capacity by the minute, Oracle’s data centers can offer considerable cost savings compared to competing infrastructure. That’s why demand is skyrocketing from top AI startups like OpenAI, Cohere, and xAI. Oracle had 85 data centers in operation and 77 more under construction in the first quarter of fiscal 2025 (ending August 31), but Ellison thinks it could operate as many as 2,000 over the long term.
Next year, Oracle aims to offer a cluster of 131,072 GPUs, a big step up from its current largest clusters of around 32,000 GPUs. But there’s another difference: The new cluster will use Nvidia’s latest Blackwell chips, which can perform AI inferences at 30 times the rate of its flagship H100, which Oracle currently uses. In theory, it will allow developers to build the largest AI models ever.
This will be a significant benefit to Nvidia. It generated $26.3 billion in data center revenue during the second fiscal quarter of 2025 (ending July 28) primarily from GPU sales, which was a 154% increase from the same period a year earlier. That growth rate slowed compared to previous quarters because the numbers have gotten so big, but Nvidia’s customers show no signs of backing off.
In fact, Oracle spent $6.9 billion on data center infrastructure in fiscal year 2024 and plans to… double that figure in fiscal year 2025. But it's getting better.
Ellison's latest comments are great news for Nvidia
During the analyst meeting, Ellison told the audience about a dinner he hosted with Tesla Elon Musk, CEO (and founder of xAI), and Jensen Huang, CEO of Nvidia, at Nobu in Palo Alto. He reminded himself and Musk begging Huang calls for more GPUs:
Please take our money…take more. You're not taking enough… We need you to take more of our money. Please.
–Ellison and Musk's comments to Jensen Huang over dinner, according to Ellison.
Oracle Cloud Infrastructure (OCI) generated $2.2 billion in revenue during the first quarter (primarily from leasing data center capacity to customers), up 46% from the same period last year. However, Oracle ended the quarter with a record $99 billion in performance obligations (RPOs) remaining, a whopping 53% increase. The company said it signed 42 new GPU capacity agreements worth $3 billion during the first quarter, which contributed to its backlog.
Oracle can't serve all those AI developers (or convert their RPO into revenue) until… Brings more data centers onlineThat's why Ellison begged Huang to buy him more GPUs.
Tesla is in a similar situation. It’s fighting for supremacy in the self-driving software industry and is trying to get a set of 50,000 GPUs up and running before the end of this year to further train its AI models. Tesla will spend $10 billion on that infrastructure, but will need more capacity over time.
Now might be a good time to buy Nvidia stock
Oracle and Tesla aren't the only companies investing heavily in data centers. Microsoft spent $55.7 billion on capital expenditures (capex) primarily related to AI infrastructure during its fiscal year 2024 (ended June 30), and plans to spend even more in fiscal year 2025. Similarly, AmazonU.S. capital spending is on track to exceed $60 billion this calendar year.
Based on Nvidia's trailing 12-month earnings per share of $2.20, its stock trades at a price-to-earnings (P/E) ratio of 52.7. That's expensive compared to the company's P/E ratio of 30.9. Nasdaq 100 technology index, which is home to many of Nvidia's large technology peers.
However, Nvidia’s fiscal 2026 year is set to begin at the end of January 2025, and Wall Street expects the company to post $4.02 in earnings per share for the year. That puts its stock at a forward price-to-earnings ratio of just 28.8. In other words, investors willing to hold onto Nvidia stock for at least the next year and a half could be getting a bargain at its current price — assuming Wall Street’s forecast turns out to be correct.
At some point, Nvidia will experience a slowdown in activity, as the scale of current spending on AI will be very difficult to sustain over the long term. In addition, competition is slowly emerging in the GPU space, which could erode some of the company's market share in the coming years.
However, based on the facts available today, Nvidia stock is likely to be a good buy at the current price. The AI spending allocated by some of its largest customers suggests that a slowdown is not in sight on the immediate horizon.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Antonio Di Pizio has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends the following options: January 2026 $395 call options on Microsoft and January 2026 $405 call options on Microsoft. The Motley Fool has a Disclosure Policy.
Oracle founder Larry Ellison just gave Nvidia stock investors some fantastic news Originally published by The Motley Fool