Key Points
Oracle stock jumped nearly 6% after Neocloud companies CoreWeave and Nebius reported explosive revenue growth, signaling strong AI infrastructure demand.
CoreWeave's pipeline surged from roughly $25 billion to over $104 billion in one year, while Nebius posted a stunning 454% revenue increase.
Oracle Corporation (NYSE: ORCL) stock was up 5.9% as of 2:38 p.m. ET on Wednesday. The S&P 500 and the Nasdaq Composite were up 0.4% and 0.7%, respectively.
Shares of the hyperscaler and tech giant are gaining after CoreWeave and Nebius -- two so-called neocloud companies -- reported a fresh round of strong earnings.
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CoreWeave and Nebius signal strength in AI
CoreWeave released its Q2 numbers yesterday after the market closed. Revenue was up an incredible 112% while its backlog grows even faster. The company says its pipeline grew from about $25 billion this time last year to more than $100 billion today.
Nebius followed with its own report this morning, pre-market, exceeding CoreWeave's success. The company revealed sales were up a whopping 454%.
Image source: Getty Images.
As neocloud operators -- firms that operate state-of-the-art data centers, renting out compute resources for AI companies -- their extreme revenue growth is an important sign for Oracle, which has bet the farm, so to speak, on its AI data center business.
Oracle's debt is an issue
This is certainly a positive sign for the health of the AI infrastructure market, but it doesn't change the long-term picture in my mind. The first signs of demand cooling aren't going to show up in their earnings.
In my view, Oracle stock is still too risky. The company has taken on too much debt to serve a highly concentrated customer base.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.