Why Broadcom Stock Is Soaring Today

Key Points

• Broadcom stock is jumping today after Oracle issued great news for AI investors.

• Oracle expects massive growth for its cloud infrastructure business over the next five years.

• Broadcom is a leading provider of connectivity chips and is poised to benefit from AI infrastructure buildouts.

• 10 stocks we like better than Broadcom ›

Broadcom (NASDAQ: AVGO) stock is roaring higher in Wednesday trading thanks to some big news in the artificial intelligence (AI) space. The company's share price was up 8.6% as of 3:30 p.m. ET. At the same point in the day's trading, the S&P 500 was up 0.1%, and the Nasdaq Composite was down 0.3%.

Broadcom's valuation is jumping today after Oracle outlined a staggering growth outlook for its cloud infrastructure business. As a leading provider of connectivity chips, other hardware, and related software services, the news is a positive indicator for Broadcom.

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Broadcom is jumping after great news from Oracle

Oracle published results for the first quarter of its current fiscal year yesterday and actually delivered sales and earnings for the period that fell short of Wall Street's expectations. The performance misses were completely overshadowed by the company's guidance, however, and its share price is skyrocketing today.

Oracle anticipates that sales from its cloud infrastructure unit will surge 77% annually to reach $18 billion this fiscal year. Four years after that point, the company expects cloud infrastructure revenue will have reached $144 billion -- good for growth of 700% across the stretch. Making matters even better, The Wall Street Journal recently reported that Oracle had inked a data center deal with OpenAI worth up to $300 billion.

What's next for Broadcom?

Broadcom has already seen stellar sales and earnings gains connected to the rise of AI data centers, and Oracle's eye-popping guidance for cloud infrastructure sales suggests that the connectivity chip leader is poised to see strong demand trends continue. While investors have shown some recent hesitance when it comes to AI stocks with highly growth dependent valuations, Oracle's latest guidance suggests that AI infrastructure spending could still be in the early innings of a massive growth trend.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.