Why Bloom Energy Rallied Higher Today

Key Points

• In July, Bloom inked a partnership to supply Oracle's data centers with its energy servers.

• Bloom's servers can convert natural gas and hydrogen to electricity without combustion.

• Is the stock too expensive, or is the party just getting started?

• 10 stocks we like better than Bloom Energy ›

Shares of Bloom Energy (NYSE: BE) rocketed 18.5% higher on Wednesday as of 12:35 p.m. ET.

There wasn't any news specifically from Bloom today; however, last night's bombshell guidance from Oracle (NYSE: ORCL) is likely boosting Bloom by association, given that Bloom inked an important data center partnership with Oracle in July.

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Oracle announces AI hypergrowth, and it will need lots of energy

Bloom surged in July after it announced a landmark deal with Oracle on July 24. For reference, Bloom's energy servers can transform natural gas or hydrogen into electricity without combustion, producing electricity from an abundant source like natural gas in a cleaner way to meet escalating electricity demand.

Bloom had served utilities and other power users in the past, but the July deal with Oracle was the first direct agreement with a cloud hyperscaler.

Therefore, when Oracle provided astonishing backlog growth in its cloud infrastructure (IaaS) business last night, that also improved the outlook for Bloom, which will likely play a role in providing electricity to those data centers. Oracle reported $455 billion in remaining performance obligation in its cloud IaaS business, up an astounding 359%. On the conference call with analysts, CEO Safra Catz noted she expects cloud infrastructure revenue to grow from $18 billion this year to a stunning $144 billion in fiscal 2030 -- over just a matter of four years.

Needless to say, that much growth will require Oracle to build a lot more data centers, which will likely be served in part by Bloom's energy servers.

Image source: Getty Images.

Bloom looks expensive, but AI growth is off the charts

After today's rally, Bloom trades at 76.5 times next year's earnings estimates. That's very expensive for a low-margin hardware business, but Oracle's multiyear guide appears to have lifted the prospects for Bloom's growth over the 2027-2030 time frame.

So while Bloom's valuation makes it risky at these levels, its artificial intelligence (AI)-related growth story keeps getting better.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.