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Oracle Enhances Generative AI Amid Cloud Competition

Oracle is ramping up its generative AI capabilities to stay ahead in the increasingly competitive cloud market
April 29, 2024

Oracle, the U.S. cloud infrastructure provider, is fortifying its generative AI capabilities as competition in the cloud industry intensifies, with more companies venturing into AI technologies.

The surge in AI adoption, driven by the launch of chatbot ChatGPT in November 2022, has led to a heightened demand for cloud computing services and data centers. This demand stems from the necessity for vast amounts of data required in AI model training, a demand that the cloud effectively meets.

Oracle has been integrating generative AI capabilities into its cloud infrastructure and applications to complement the traditional AI already embedded within them.

According to Rondy Ng, executive vice president of applications development at Oracle, traditional AI excels in detecting patterns or predicting numbers, but falls short when it comes to using large language models for number prediction. Ng explained, "So we combined the predictive numbering capability with the explainability in words. So the two together become very powerful and you need both. In the past many years, the number prediction part is already very mature. As part of the product we continue to evolve that and it’s not going to stop. Generative AI is basically the talk of the town right now."

In March, Oracle announced additional generative AI features integrated across various applications, including finance, supply chain, human resources, sales, marketing, and service. These generative AI capabilities can perform tasks such as generating financial reports and drafting job ads, thereby enhancing productivity and reducing business costs.

The move follows the firm's implementation of generative AI across its technology stack in January.

Dan Ives, managing director of Wedbush Securities, expressed optimism about Oracle's AI strategy, stating, "[It is] well positioned to be a major beneficiary of the AI revolution. The data Oracle sits on and installed base gives Ellison & co. a major advantage to monetize the software layer of AI," referring to Oracle’s chairman and chief technology officer Larry Ellison.

Oracle's investment in generative AI is strategic, as research firm Gartner highlighted in a report on April 17, stating that technology providers must stay one step ahead of the cycle, bringing generative AI capabilities to existing products and services.

JPMorgan analysts also underscored the importance of AI, stating that generative AI and AI could drive incremental IT spending and growth across the software landscape. They noted, "Many software vendors, including Oracle, have cited benefits from ongoing investments by businesses into AI technologies."

Oracle's shares have seen a 23.74% spike in the last 12 months, according to FactSet data.

CEO Safra Catz noted in March that the company had added several "large new cloud infrastructure" contracts during the fiscal third quarter, with cloud revenue rising 25% year over year to $5.1 billion.

Oracle's future market opportunities look promising, as Ellison outlined plans for more national and state government applications to run on platforms like Oracle Cloud Infrastructure. Additionally, the firm is negotiating sovereign regions with a number of countries.

In April, Oracle announced plans to invest more than $8 billion in Japan over the next 10 years to expand cloud computing and AI infrastructure. Furthermore, Oracle and Nvidia announced in March a partnership to deliver sovereign AI solutions to customers globally.

As competition in the cloud industry heats up, Oracle's strategic investment in enhancing its generative AI capabilities positions the company to capitalize on the burgeoning AI market. With its robust AI strategy and continued investment in cloud infrastructure, Oracle is poised for sustained growth and innovation in the years ahead.

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