Tom Yeung here with today’s Smart Money.
When cars were first rolled out in the late 1800s, no one really knew what they should look like. After all, no one had ever seen one before.
So, people packaged cars into the closest technology of the day: the horse-drawn carriage.
The result was an awkward vehicle that looked like its technological predecessors. Engines were often hidden in the back — a design that made them prone to overheating due to poor ventilation. These early cars featured bench-style seating, canvas roofs, and no windshields, as illustrated by the 1899 Winton Motor Carriage below.
The “horseless carriage”
These early automobiles had regulations that even treated them like horse-drawn carriages. New York limited car speeds at the turn of the century to 8 miles per hour on straight roads and 4 mph at intersections – figures meant to keep automobiles going no faster than horse-drawn vehicles.
In other words, the lack of precedent meant the new technology of internal combustion engines was shoehorned into an old technology of horse-drawn carriages. Early cars were not much better than the preceding technology they were meant to replace.
Today, most AI data centers are doing the same thing: shoehorning new technologies into old systems.
But one company is changing that formula, giving it even more room to run against competitors.
In today’s Smart Money, I’ll dive into the details of this “old dog, new tricks” AI play… and then I’ll share where you can find more like it.
The Winning Formula
First, let’s start with the horse-drawn carriages of the tech world: data centers.
From the outside, it’s difficult to tell whether a data center is AI-focused or not.
On a technological level, the AI chips that run these data centers are essentially repurposed graphics cards previously developed for running video games. They even use the same PCIe (Peripheral Component Interconnect Express) connections to attach them to central processing units (CPUs).
In turn, these AI-focused data centers borrow much of their infrastructure from existing data centers, including server racks, power systems, cooling equipment, and fiber-optic cables.
Even the business model is borrowed from traditional cloud computing. The industry is dominated by legacy firms, such as Amazon.com Inc. (AMZN) and Alphabet Inc. (GOOGL), which sell AI computing power as they do with regular cloud services. Smaller customers run on a pay-as-you-go system, while larger firms negotiate agreements with committed spending amounts.
After all, that’s how business has been done in the past. And it is today’s version of the horse-drawn carriage problem
But Oracle Corp. (ORCL) is taking a different approach.
You see, the firm operates a different type of cloud known as Oracle Cloud Infrastructure (OCI). It’s a second-generation “hybrid” approach that builds some computing infrastructure at customer locations while offloading the rest to off-site data centers.
Think of it like having food in the fridge but also your favorite pizza place on speed dial. You can cook at home when you want… or have a hot meal delivered when you don’t. Oracle’s systems make this switching effortless.
That means OCI customers have the best of both worlds. They can run AI on their own servers if they’re handling sensitive data, or they can have Oracle’s servers do the work if it’s less important.
It’s why firms like OpenAI use OCI products. No OpenAI executive wants the “secret sauce” of ChatGPT sitting in an off-site data center owned by Amazon or Alphabet. That’s inviting the theft of billion-dollar trade secrets.
Instead, OCI allows OpenAI to run its most sensitive projects on in-house servers and offload less crucial tasks to the cloud. It’s also a major reason why Oracle was chosen to run the $500 billion federal Stargate Project.
The result is that Oracle is now growing faster than virtually every other major cloud provider. Here’s the company’s projected cloud revenue for the next several years…
- 2025: $18 billion
- 2026: $32 billion
- 2027: $73 billion
- 2028: $114 billion
- 2029: $144 billion
And the best part is that these numbers are entirely achievable because Oracle already has $455 billion of potential contracts in its pipeline.
They’re the ones packaging new AI technologies into a new business model.
This isn’t like the leap from the horse and buggy to the “horseless carriage.” It’s a jump all the way to the first best-selling car.
Here’s what I mean…
Oracle’s “Tin Lizzie” Moment
In 1899, the Winton Motor Carriage company produced roughly 100 of the car pictured at the top of this issue – a figure considered a “remarkable example of mass-production” at the time. In fact, a Winton was the first car to cross America from coast to coast in 1903. They were successful… much like the cloud computing giants are today.
But then came the Ford Model T.
Here’s how many Model Ts were built in the years after their invention…
- 1908: 1,000
- 1909: 10,660
- 1910: 19,050
- 1911: 71,778
By the time 1928 rolled around, 15 million Model Ts had been built and sold. All it took was a change in business model and car design.
Today, Oracle is doing the same in AI — reinventing the business model and reshaping what computing looks like in the modern era. In fact, Oracle now even counts giant cloud computing providers like Alphabet as customers.
Eric saw this writing on the wall – or should I say engines on the road – when he recommended Oracle to his Fry’s Investment Report subscribers almost exactly one year ago. He wrote at the time…
[Investors might still be underestimating [Oracle’s] technological prowess and long-term earnings potential… The company may be a legendary “old-timer” of the technology sector, but thanks to savvy, forward-looking strategic planning, it has become a dynamic AI play.
Since then, the company has risen almost 90%… adding another $400 billion to its market capitalization in the last two weeks alone after reporting spectacular guidance during its second-quarter earnings call, which we covered here last week. That’s like getting in on Ford Motor Co. (F) in 1908.
But Oracle is only getting started in its AI cloud growth. This is a multiyear growth story with a long runway ahead of it. And there is still time to get into the driver’s seat.
To stay up-to-date on all things Oracle, join us at Fry’s Investment Report today. As a member, you will also receive all of Eric’s latest research, reports, and recommendations.
And Oracle isn’t the only multi-bagger on Eric’s radar.
The future of AI, like the concept of a car in the late 1800s, is as unimaginable as it is incredible. That is why Eric has put together a comprehensive list of holdings designed to grow your wealth across every corner of the AI landscape.
Simply click here to learn more.
Until next time,
Thomas Yeung, CFA
Market Analyst, InvestorPlace
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