Wells Fargo Sees Oracle as a Major AI Infrastructure Leader

Wells Fargo initiated coverage of Oracle (ORCL) with an Overweight rating, highlighting the company’s transformative position in the AI and cloud markets. The firm pointed to nearly $500B in AI-related deals with OpenAI (OPENAI), xAI (X.AI), Meta (META), and TikTok (BDNCE), signaling one of the largest infrastructure commitments in the industry.

Massive AI Deals Underpin Bullish Thesis

According to analyst Michael Turrin, Oracle is set to scale rapidly due to a pipeline of major AI infrastructure wins.
Key highlight: OpenAI’s 4.5GW / $300B+ compute contract—one of the largest cloud deals ever signed.

Cloud Growth Outlook (OCI)

OCI market share projected to rise from 5% in 2025 to ~16% by 2029
Oracle expected to approach scale similar to the next closest hyperscaler
Still trails Amazon (AMZN) and Microsoft (MSFT), which are projected around 30%
Post-2029, Wells Fargo expects the market share gap to narrow further
OCI seen proving its ability to support complex AI infrastructure across multiple hardware architectures

Software Leadership Strengthens the Thesis

Oracle’s software portfolio, nearly $40B in annual revenue, boosts margins and reinforces customer stickiness:

Outright leader in data (databases + data platforms)
Major player in enterprise and industry apps (Fusion, healthcare, etc.)
Leader in 12+ Gartner Magic Quadrants
Wells Fargo expects the rise of Oracle’s AI-as-a-Service (AIaaS) model to drive a flywheel similar to Microsoft’s approach—customers adopt both apps and infrastructure together.

Risks: OpenAI Dependence, Margin Pressure, and Debt

Despite strong momentum, Wells Fargo flagged key risks:

Heavy exposure to OpenAI, representing ~60% of Oracle’s pro forma remaining performance obligations (RPO)
Shifts in OpenAI demand could materially impact Oracle’s financials
Transition to GPU-based compute brings lower gross margins (30–40%), pushing Oracle’s corporate GM profile down from 80% in FY22 to <50% by FY29
Massive infrastructure buildouts may add leverage and increase debt burden

Price Target

Wells Fargo set a $280 price target for Oracle, reflecting confidence in its long-term AI and cloud trajectory.