What is a data center and why are they important for AI?

Data centers are specialized facilities that house computer systems, servers, and networking equipment. For AI applications, these centers need to be much more powerful than traditional data centers because AI requires enormous computing power to process and analyze data. Oracle's cloud expansion is focused on building these advanced data centers to meet the growing demand for AI services. Without this physical infrastructure, AI applications simply couldn't run at scale.

What are GPUs and why do companies like NVIDIA benefit from this trend?

GPUs (Graphics Processing Units) were originally designed for rendering images and video but have become essential for AI computing. Unlike traditional CPUs, GPUs can perform many calculations simultaneously, making them ideal for the complex mathematical operations that power AI systems. NVIDIA dominates this market, providing the specialized chips that Oracle and other cloud providers need to build effective AI infrastructure. As companies expand their AI capabilities, demand for these chips continues to grow significantly.

What is a REIT and how do they relate to data centers?

REITs (Real Estate Investment Trusts) are companies that own, operate, or finance income-producing real estate. Data center REITs like Equinix (EQIX) and Digital Realty (DLR) specialize in owning the physical buildings where servers and networking equipment are housed. These facilities require specialized power, cooling, and security features. As Oracle and other tech companies expand their cloud capabilities, they often rely on these REITs rather than building their own facilities, creating significant growth opportunities for these specialized real estate companies.

What does "cloud expansion" actually mean for Oracle?

When Oracle expands its cloud capabilities, it's essentially building more data centers and filling them with advanced computing equipment. This requires buying thousands of servers, networking equipment, power management systems, and securing physical space to house it all. The company is doing this to compete with other major cloud providers like Amazon, Microsoft, and Google in offering AI and other advanced services to businesses. Oracle's stock upgrade was driven by news that they've secured major new contracts, indicating growing market share in the competitive cloud services industry.

Why does AI require so much infrastructure investment?

AI systems, particularly advanced ones like large language models, require enormous computing resources. Training these models can use thousands of specialized chips running for weeks or months. Even after training, running these models for users requires significant ongoing computing power. Additionally, AI systems generate intense heat and require specialized cooling systems, high-capacity networking to move data quickly, and advanced power management. This combination of factors drives the massive infrastructure investments that benefit the companies in this group.

16 handpicked stocks

Oracle's Cloud Boom

Oracle's major cloud contracts triggered a stock upgrade, highlighting a massive expansion in AI data centers. These companies provide the essential hardware, chips, networking, and real estate needed to power this growth. Each was selected for its direct exposure to this multi-billion dollar infrastructure boom.

Han Tan | Market Analyst

Published on July 1

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

NVIDIA Corporation

NVDA

Current price

$188.95

As the dominant provider of GPUs for AI, Nvidia's hardware is essential for the AI workloads driving Oracle's cloud expansion.

Super Micro Computer, Inc.

SMCI

Current price

$52.49

A leading provider of high-performance servers optimized for AI, which are crucial for building out Oracle's new data centers.

Dell Technologies Inc

DELL

Current price

$147.37

A significant provider of the servers and storage systems that form the backbone of the large-scale data centers Oracle is building.

Arista Networks, Inc.

ANET

Current price

$144.45

Equinix, Inc.

EQIX

Current price

$773.83

Digital Realty Trust Inc.

DLR

Current price

$173.73

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About This Group of Stocks

Our Expert Thinking

Oracle's aggressive cloud expansion signals a larger industry trend. As major tech companies race to build AI infrastructure, they're driving an enormous spending wave on data centers. This creates a powerful tailwind for companies that supply the critical components and services needed for this expansion.

What You Need to Know

This group offers exposure to the full data center supply chain - from chips and servers to networking equipment and the physical buildings themselves. These companies are positioned to benefit from a sustained, multi-year capital investment cycle as cloud providers compete to meet the surging demand for AI computing power.

Why These Stocks

These 16 companies were selected specifically for their direct role in building modern AI data centers. They represent various parts of the ecosystem - semiconductor manufacturers, server builders, networking providers, and data center REITs - all essential to the infrastructure Oracle and others need for expansion.

Group Performance Snapshot

14 of 16

Stocks Rated Buy by Analysts

14 of 16 assets in this group are rated Buy by professional analysts.

15.8% vs 4%

Group Growth vs Bank interest

This group averaged a 15.8% return last month, beating the typical 4% bank rate.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🔄

Multi-Year Growth Cycle

This isn't just a quick boom. The AI data center build-out represents a massive, sustained investment cycle that could last years as cloud providers race to expand capacity.

💰

Billions in New Spending

Oracle's plans to double its data center footprint signals just one piece of an industry-wide wave of capital expenditure. These 16 companies are positioned right in the path of this money flow.

🧩

The Full AI Infrastructure Chain

While everyone's watching the AI software race, these companies provide the critical physical infrastructure that makes it all possible. Without them, the AI revolution simply can't happen.

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