Jim Cramer Says Oracle's $455 Billion Backlog Is Because Of Stargate Project: 'Who Else Would Be Placing Those Orders'
News Summary
CNBC’s Jim Cramer attributes Oracle Corp.'s monumental $455 billion backlog to the “Stargate” AI infrastructure project, questioning the 359% surge in the company's business pipeline. Despite narrowly missing Wall Street’s first-quarter revenue and earnings estimates, Oracle’s stock soared 28.36% in after-hours trading, fueled entirely by its massive future revenue pipeline, or Remaining Performance Obligations (RPO). The RPO surged 359% to $455 billion, with CEO Safra Catz confirming four multi-billion-dollar contracts with three different customers and expecting RPO to exceed half-a-trillion dollars soon. The “Stargate” project, announced by US President Donald Trump in January 2025, is a $500 billion joint venture between Oracle, OpenAI, and SoftBank. It aims to build a vast network of AI data centers across the United States, positioning Oracle’s cloud infrastructure as a critical component for the future of artificial intelligence.
Background
Oracle is a leading global enterprise software and hardware company that has significantly expanded its Oracle Cloud Infrastructure (OCI) services in recent years, competing with giants like Amazon AWS, Microsoft Azure, and Google Cloud. OCI has shown potential in handling high-performance computing and AI workloads. Remaining Performance Obligations (RPO) is a key financial metric representing the value of contracted work that has not yet been delivered to customers. A substantial increase in RPO typically signals strong future revenue growth for a company. The “Stargate” project is a major initiative backed by the US President Donald Trump administration, aiming to bolster American global leadership in artificial intelligence through massive investments in domestic AI infrastructure, thereby fostering innovation and competitiveness.
In-Depth AI Insights
Beyond Cramer's speculation, what are the strategic implications of such a massive backlog tied to the Stargate project for Oracle and the broader AI infrastructure landscape? - Oracle's Cloud Infrastructure (OCI) receives immense validation and market share by securing a mega, government-backed contract. - This significantly de-risks the Stargate project's execution, ensuring critical infrastructure availability through a committed major cloud provider. - It helps consolidate power within the AI infrastructure space, potentially leading to a few dominant players with extensive cloud capabilities. How does the Trump administration's backing of the Stargate project influence its long-term viability and competitive dynamics in AI? - Direct government endorsement provides a powerful political tailwind and potential for future government contracts, insulating it from market caprice. - The Stargate project could create a 'national champion' in AI infrastructure within the US, enhancing its global competitiveness through coordinated national efforts and investment. - This level of government support might serve as a significant barrier to entry for other potential competitors, offering unparalleled scale and financial security. What are the understated risks for investors focusing solely on the RPO surge, especially given the Q1 earnings miss? - Despite the huge backlog, inherent execution risks exist in delivering on multi-billion dollar, complex projects, which could lead to delays or cost overruns. - The RPO growth doesn't immediately translate to profit; revenue recognition can take years, and operational challenges might arise during the interim. - Market over-exuberance, as suggested by Cramer's 'panic buying,' could lead to short-term stock volatility if actual financial performance in subsequent quarters doesn't rapidly catch up to the RPO's promise.