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

Updated 2 days ago | Published at juillet 1