One of Silicon Valley’s original powerhouses is well and truly back. Shares of Oracle are up 55% for the year, trailing only Nvidia’s nearly 150% rally in that span. The stock popped 11% Tuesday—the first time in over two years shares rose by double-digits in a single day—after Oracle beat earnings expectations, highlighting how the company has rapidly grown its cloud business while simultaneously partnering with the industry’s major players.
The AI boom has so far not been as kind to other legacy tech names. Chief among them is Intel, whose “breathtaking fall from grace,” as Bloomberg’s Ian King put it, contrasts mightily with Oracle’s revitalization. Once the world’s biggest chipmaker, Intel announced it would cut 15,000 jobs, or about 15% of its workforce, as revenue continues to drop and its own forecast remains dim.
The disappointing earnings release at the start of August sent share prices plummeting, with the stock now down roughly 60% year-to-date.
On its face, it appears Intel should have been well positioned to take advantage of AI boom, particularly as the Biden administration sought to reconstruct the chipmaking industry in the U.S.
The company failed to keep up with competitors like Nvidia in areas like chip design, however. Same goes for the so-called foundry business, in which Taiwan’s TSMC is the semiconductor manufacturer of choice. At the same time, Intel's core business of building PC chips is also under pressure, noted Angelo Zino, a tech analyst and senior vice president at CFRA Research.
“Intel’s essentially in a very lose-lose situation,” he said.
Oracle on a roll
It’s difficult to see a path forward for one of America’s early tech icons. That’s not the case, however, at Oracle, another legacy name that has stirred fresh excitement among investors.
The company reported revenue of $13.3 billion for the quarter, up 8% from last year, but several analysts expect that growth to accelerate into double-digits. That’s in large part due to its infrastructure-as-a-service (IaaS) business, which was up 45%.
While the company’s cloud market share still lags far behind the likes of Microsoft, Google and Amazon Web Services, Oracle now boasts valuable partnerships with all three. The deal with AWS announced on Monday, which enables customers to fully access Oracle’s market-leading database within Amazon’s cloud infrastructure, completed the trifecta.
That news surprised few on Wall Street. Nonetheless, the strong earnings release forced some mutual funds who had underweighted the stock to buy in, said Ted Mortonson, a managing director and tech strategist at Baird.
“Either you love [founder and chief technology officer] Larry Ellison and [CEO] Safra Catz, or you don't,” he said. “You have history or you believe them, or you don't. Well, you had capitulation that you better believe them in this cycle.”
Unfortunately, Intel CEO Pat Gelsinger doesn’t find himself in the same boat.
