Nvidia (NVDA +0.10%) has soared in the triple digits over the past year, thanks to its dominance in the artificial intelligence (AI) market. The company is the world's leading AI chipmaker, powering the crucial task of training AI models so they can then go on to solve complex problems. This has helped Nvidia's earnings soar and the stock find its spot in the portfolios of many billionaire investors.
But two billionaires recently cut their positions in Nvidia and, at the same time, placed bets on another AI stock instead. Steven Cohen, chief executive officer of Point72 Asset Management, decreased his holding of Nvidia shares by 66% in the fourth quarter of last year, while Israel Englander, CEO of Millennium Management, lowered his position by 45%.
You'll find top tech stocks among the biggest positions in these billionaires' funds, so it's clear they're focused on selecting tomorrow's AI winners. For example, two of the most heavily weighted tech stocks in Englander's fund are Microsoft and Alphabet, companies that are pouring investment into AI.
What company is Cohen and Englander betting on as a potential AI winner over the long term? It's a player that recently said demand for its AI infrastructure is so strong, it's actually exceeded supply. Let's find out more about this potential AI star that's a favorite of these billionaires right now.
Image source: Getty Images.
Cohen and Englander agree on this stock
You'll probably recognize the name of this company, as it's been around for years as a software and database powerhouse. I'm talking about Oracle (ORCL 0.57%). In the fourth quarter, Cohen opened a new position in Oracle, while Englander increased his holdings in the tech giant by 138%.
Oracle, founded in the late 1970s, was originally known for its database management system but has since greatly broadened its offerings. It remains smaller than rivals like Amazon and Microsoft in the cloud computing market, but in recent times thanks to AI demand, it's recognized the cloud infrastructure growth opportunity -- and has made that its major focus.
In the most recent quarter, Oracle's cloud infrastructure revenue soared 49% to $1.8 billion. And total cloud revenue -- including software as a service and infrastructure as a service -- represented 38% of overall revenue. The quarter signals a turning point, with the company's total cloud revenue coming in higher than total license support revenue for the first time ever.
Oracle's cloud infrastructure business is driving growth, and by offering advantages that are winning users over, this could continue. The company notes it's cheaper than competitors, such as Google Cloud, for example. Oracle also sells a variety of cloud options such as a platform that allows users to run their own Oracle Cloud. The company even offers multicloud services, so you can use an Oracle service in another public cloud, like Microsoft's Azure.
NYSE: ORCL
Key Data Points
Demand surpassing supply
As I mentioned earlier, demand for Oracle's AI infrastructure services is surpassing supply -- even as the company is expanding current data centers and opening new ones. Oracle predicts that its Gen2 cloud infrastructure business will continue in a "hypergrowth phase" for quite some time. The company today has 47 public cloud regions worldwide and is building eight more. Twelve of these regions connect with Azure, and more are on the way.
Oracle is likely to benefit as the capacity increase allows it to address more and more of the growing demand and it integrates its earlier acquisition of digital information systems company, Cerner.
Should you forget Nvidia and turn to Oracle? Billionaires Steven Cohen and Israel Englander still hold a great deal of Nvidia shares, and the company offers solid long-term prospects. Nvidia sells today's top-performing chip, and its research and development resources suggest it could stay ahead as it releases new products -- such as the Blackwell architecture expected later this year. This means Nvidia shares could have plenty of room to run.
But Oracle, which has gained about 20% over the past year, has some catching up to do when it comes to share performance -- and it may do just that, considering recent earnings trends and long-term prospects. That makes this top tech stock look pretty cheap at just 20x forward earnings estimates -- and offers you the perfect opportunity to turn your attention away from Nvidia for a moment and follow billionaire investors into Oracle.
