Oracle Has Fantastic News for Nvidia Stock Investors

Oracle (NYSE: ORCL), one of the biggest players in the artificial intelligence (AI) hardware ecosystem, released its fiscal 2026 results (for the year ended May 31) on June 10.

The reaction to the company's financial results wasn't great, as concerns about its fast-growing capital expenditures and mounting debt to finance the build-out of new data centers led investors to press the panic button. However, Oracle's results make it clear that the investments in AI data center infrastructure won't be slowing down any time soon, which is great news for Nvidia (NASDAQ: NVDA).

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Oracle has indicated that GPU demand remains solid

A closer look at Oracle management's comments on the latest earnings call indicates that demand for graphics processing units (GPUs) in data centers remains robust. Oracle noted that the global utilization rate of GPUs in data centers stood at a solid 97.5% last quarter.

This high utilization rate suggests that GPUs remain in high demand for running AI workloads in data centers. This bodes well for Nvidia, which controls an estimated 80%-90% of the AI accelerator market. What's more, Oracle is on track to significantly increase its capital expenditure this year, suggesting that the demand for Nvidia's GPUs will continue to increase.

Oracle expects $70 billion in capex in fiscal 2027, with another $20 billion to $25 billion to be funded by customer prepayments. This will bring Oracle's overall capex in fiscal 2027 to a range of $90 billion to $95 billion, well above the $56 billion spent in fiscal 2026 ($8 billion of which was funded by prepayments).

The substantial acceleration in Oracle's capital spending reflects the broader AI infrastructure space. According to Gartner, global AI infrastructure spending could jump to $1.36 trillion this year, followed by $1.75 trillion in 2027. Nvidia's status as the leading player in the AI chip market puts it in a terrific position to capitalize on this massive AI infrastructure spending, especially given that GPUs continue to dominate the chip landscape despite the emergence of competing offerings.

This is yet another sign to buy Nvidia stock

The aggressive growth in Oracle's capex, and the fact that its remaining performance obligations jumped to a whopping $638 billion in the previous quarter from $138 billion a year ago, indicate that Nvidia's addressable market continues to expand rapidly. Not surprisingly, the company is forecasting its growth rate to accelerate.

Nvidia's earnings are expected to jump by 88% in the ongoing fiscal 2027, well above the 23% earnings growth of the S&P 500 index. The 42% earnings growth projection for the next fiscal year to $12.73 per share also exceeds the 17% growth in the S&P 500. With an earnings multiple of 31, investors can now buy Nvidia stock at a discount to the tech-focused Nasdaq-100 index's earnings multiple of 35.

If Nvidia indeed achieves $12.73 in earnings per share in fiscal 2028 (which will end in January 2028) and trades at even 25 times earnings, its stock price could reach $318, suggesting a potential jump of 50%. However, the company can do much better than that, as its outstanding earnings growth should ideally be rewarded with a premium valuation.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Oracle. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.