Oracle shares rose 2.4% on Tuesday after OpenAI's newly launched ChatGPT-6 Astra drew a positive online reception, easing investor worry about the software giant's computing commitments to the ChatGPT maker. Morningstar analyst Luke Yang says the reception boosts confidence in Oracle's OpenAI backlog.
Oracle's stock rose 2.4% on Tuesday, as investors welcomed the early reception to OpenAI's newly launched ChatGPT-6 Astra model. Because Oracle's fortunes are closely tied to OpenAI's, the model's reception matters directly to the stock market view of Oracle's growth prospects.
Astra reception lifts sentiment
OpenAI launched ChatGPT-6 Astra last week, and the online reception suggests the company is retaking the lead in the race to build the best artificial-intelligence models. Earlier ChatGPT versions first put AI on the map for many users, though Anthropic and Alphabet's Google have at times won acclaim for their own models over the past few years.
Morningstar analyst Luke Yang told MarketWatch that Astra is ahead of Anthropic's Fable model on multiple benchmarks. According to MarketWatch: "It looks like OpenAI is turning things around", Yang said, adding that the development boosts investors' confidence in Oracle's OpenAI backlog — the dollar amount of commitments yet to be recognized as revenue.
Yang explained that because Astra has the complete ability to operate a computer, new use cases could let it complete entire workflows that previous models could not handle. Astra is currently available only to a small group of users, but a further breakthrough on the product front would drive up demand for computing power and could push Oracle's stock even higher, he said.
Capex concerns remain ahead of earnings
Investors have been concerned this year about Oracle's high capital expenditures on data centers, as well as its profitability and its ability to fund its noncancelable contract commitments. OpenAI signed a contract with Oracle last September to buy $300 billion in computing power over five years, and analysts have argued the company's growth prospects are largely linked to OpenAI's success.
Oracle reports earnings on Thursday. Several analysts anticipate strong cloud revenue growth, though the extent of Oracle's own spending remains a nagging issue for investors.
Source: MarketWatch
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