Oracle vs. Alphabet: Which Is the Better AI Cloud Stock to Own for the Next 5 Years?

Yahoo Finance ·

There's a growing list of technology companies investing heavily in artificial intelligence (AI) cloud computing as demand for compute capacity accelerates. Bank of America estimates that data center infrastructure spending will more than double to $2.1 trillion by 2028. But not every company that's spending money now on AI cloud computing will have substantial sales and earnings to show for it later. Alphabet ( GOOGL -2.20% ) ( GOOG -1.93% ) and Oracle ( ORCL -6.93% ) are two prominent cloud companies ramping up their AI investments right now. Still, while Alphabet's cloud sales are accelerating due to its spending, Oracle's debt is worrying shareholders. Investors wondering which is the better AI cloud stock to own over the next five years need only look at Google Cloud's third-quarter sales doubling for their answer. Here's why Alphabet is the safer long-term bet. Alphabet stock fell hard recently amid investor concerns about its high capital expenditures, which are expected to reach up to $205 billion this year. The spending has resulted in $9.1 billion in negative free cash flow, worrying many Alphabet shareholders. But investors seemed to misunderstand two factors: First, $5.1 billion of the negative free cash flow was from a one-time fee to the European Commission, making the decline not as bad as it first appears. The second is that Alphabet's AI spending already appears to be paying off amid rising Google Cloud sales.

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