Oracle (NYSE:ORCL) stock was actually down slightly on the day just before noon, but surged 3% almost in a straight line higher on news that Elon Musk’s xAI is in talks to rent Oracle servers in what could be a $10 billion deal.
This deal between Elon Musk’s artificial intelligence startup and the cloud services provider appears to center around additional proposed capacity. Allegedly, this additional capacity would contribute to Musk’s plans to more truly rival OpenAI.
However, reports of the deal, citing sources from Oracle, suggest that the deal is far from done. Reuters says that talks are still underway and cautions that there is no guarantee xAI and Oracle partner up.
That said, this potential deal does signal that Elon Musk is focusing his attention on the ways in which AI technology can reshape his core businesses. Let’s dive into what to make of this news, and what it means for Oracle investors.
ORCL Stock Moves Higher On News of Potential xAI Deal
This massive potential deal is notable, just in terms of its sheer size. xAI was in talks to raise $3 billion last month, valuing the company somewhere in the ballpark of $18 billion. Talks with Oracle mean the AI startup is looking to secure a deal for around half of its current market capitalization.
That’s a very bold move, but it’s one investors should expect from the likes of Elon Musk.
The reality is that artificial intelligence companies require a lot of computing power and storage. Companies like Oracle benefit from this rise, providing the infrastructure needed to support AI applications.
For Oracle investors, this deal is far more meaningful than simply the potential $10 billion in revenue. It would send a signal to the stock market that Oracle is becoming a cloud provider of choice for AI firms.
Investors should keep ORCL stock on their watch lists while they wait for more details of the deal to emerge.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
