Buy and Hold: 2 Artificial Intelligence (AI) Stocks Built for the Long Haul

Oracle and Broadcom are demonstrating significant financial gains from the burgeoning AI infrastructure market. Oracle reported a 359% year-over-year increase in remaining performance obligations to $455 billion, driven by robust demand for its cloud services, including a 1,529% surge in multicloud database revenue. Similarly, Broadcom's consolidated backlog reached a record $110 billion, with AI product revenue growing 63% year-over-year, as it supplies essential components for AI-driven data centers. These strong performances highlight the accelerating investment in AI, with data center spending for AI workloads projected to reach $5.2 trillion by 2030, positioning these companies as key beneficiaries in the ongoing AI revolution.

Analysis

Oracle and Broadcom are exhibiting significant fundamental acceleration driven by the AI infrastructure build-out. Oracle's transformation is evidenced by a 359% year-over-year surge in remaining performance obligations (RPOs) to $455 billion, a figure that has tripled from the previous quarter and is expected to surpass $500 billion. This explosive growth, contrasted with its historical low single-digit revenue increases, is propelled by its cloud services, particularly its multicloud database revenue which grew an extraordinary 1,529% last quarter. Similarly, Broadcom, a key supplier of networking and semiconductor components, is capitalizing on the physical expansion of data centers. The company's consolidated backlog hit a record $110 billion, and revenue from its AI products grew 63% year-over-year, now accounting for 33% of total revenue. Management's guidance for 66% year-over-year growth in AI chip revenue next quarter reinforces this momentum. These firm-specific metrics substantiate the broader market trend, projected by McKinsey to reach $5.2 trillion in AI data center spending by 2030, and indicate that both companies have secured substantial, forward-looking revenue streams.

Key Decisions for Investors

• Given the substantial, contractually obligated backlogs at both Oracle ($455B in RPOs) and Broadcom ($110B), investors should recognize the reduced forward revenue risk for these companies compared to more speculative ventures in the AI sector.
• For Oracle, the key inflection point is its successful transition to a high-growth cloud infrastructure player; investors should closely monitor the rate at which its monumental RPO balance converts into recognized revenue in upcoming quarters.
• Despite significant year-to-date stock appreciation in both Oracle and Broadcom, the record order books and strong forward guidance suggest the AI-driven earnings growth cycle has durable momentum, supporting a long-term bullish thesis.
• Investors should monitor for any signs of slowing in enterprise AI spending or increased competition that could impact the pace of backlog conversion for both companies, as the current performance sets a high bar for future quarters.