Investors are comparing Oracle and Dell to determine which is the better AI stock. Oracle is known for its cloud services and AI capabilities, while Dell has been expanding its AI offerings. Both companies are vying for market dominance in the rapidly growing AI sector. Analysts are closely watching the performance of both stocks to see which one will come out on top in the AI market.
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Demand for artificial intelligence (AI) hardware has jumped substantially in the past couple of years. Technology giants in the U.S. and abroad, along with governments around the globe, are pouring billions of dollars into developing powerful large language models (LLMs), which can then be deployed to create useful applications to enhance productivity. Market research firm IDC is expecting global AI spending to hit a massive $337 billion this year. That figure is expected to more than double by 2028 to $749 billion.
Oracle has traditionally been known for providing database management software, but AI has opened a whole new growth opportunity for the company. Customers have been rushing to rent Oracle's cloud infrastructure for both AI model training and inferencing applications. In fact, the demand for Oracle's cloud infrastructure is so strong that it doesn't have enough capacity available to meet all of it.
Oracle's cloud infrastructure revenue shot up an impressive 51% year over year in its fiscal 2025's third quarter (which ended on Feb. 28). The segment's growth was well ahead of the 8% increase in Oracle's overall revenue last quarter. The cloud infrastructure business now produces 19% of Oracle's top line, up by almost six percentage points from the year-ago period. This business is set to move the needle in a bigger way for Oracle in the future.
AI training and inference in the cloud take place with the help of specialized servers that are set up in a way that they can process huge amounts of data quickly and in an efficient manner with the help of various types of chips that include graphics cards, processors, and high-bandwidth memory.
Not surprisingly, the demand for AI servers has shot up remarkably for training and deploying AI models and applications. According to one estimate, sales of AI servers could jump by almost 6 times between 2024 and 2030, generating an annual revenue of $838 billion by the end of the decade.
Dell is the largest player in the server market, with an estimated market share of 7.2% in the fourth quarter of 2024. The booming demand for AI servers gave Dell's infrastructure business a big lift in the recently concluded fiscal 2025, with its revenue from this segment jumping an impressive 29% year over year to $43.6 billion.
However, Dell is expecting its revenue to increase by 8% in the current fiscal year, which would be identical to the previous one. Analysts are expecting identical growth in the next fiscal year, followed by a slowdown two years later.
While Dell's future does seem promising thanks to the two AI-related catalysts the company is sitting on, the rapid proliferation of this technology is moving the needle in a bigger way for Oracle. This is evident from Oracle's guidance for the next couple of fiscal years, which points toward an improvement in its growth rate.
The one thing in Dell's favor is its cheap valuation, but the premium that Oracle is trading at is justified. Oracle has built up a massive revenue pipeline that should translate into years of solid growth.
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