Not Alphabet. Not Microsoft. This Is the Cloud Stock I'd Buy With $5,000 Right Now.

When investors consider cloud computing, Alphabet (GOOGL -2.47%)(GOOG -2.32%) and Microsoft (MSFT -1.93%) are frequently the first companies that come to mind. However, Oracle (ORCL -4.64%) is also making significant strides in AI infrastructure, and its rapidly expanding cloud business presents another opportunity to capitalize on the AI boom. With $5,000 to invest right now, Oracle may prove to be a more compelling choice than these industry titans.

Oracle's cloud infrastructure business is experiencing robust growth, with revenue increasing 121% to $7.4 billion in the most recent quarter. This indicates that its cloud division is becoming a crucial growth engine rather than merely an extension of its traditional software offerings. The company's substantial backlog, reflecting a record $664 billion in remaining performance obligations (RPO), further highlights the increasing demand from customers for cloud capacity to support AI training, applications, and inference.

What sets Oracle apart from its cloud competitors is its unique blend of established database expertise and innovative cloud infrastructure tailored for enterprise workflows. Unlike Microsoft Azure and Alphabet's Google Cloud, which vie for dominance in broad cloud ecosystems, Oracle leverages its database business to provide AI-driven solutions that seamlessly integrate with customers' existing systems. This approach enables businesses to incorporate AI into their operations without the need for costly system overhauls.

Furthermore, Oracle's extensive software portfolio, including enterprise resource planning, human resources, and supply chain tools, offers businesses recurring revenue streams. This dual-source of income from AI-driven growth and recurring software sales enhances Oracle's prospects for expansion, bolstering the case for investing in this cloud stock.

Despite the promising outlook, Oracle's heavy investments in data center expansion are currently impacting its free cash flow, as the company is spending more than its operations generate. This could pose a risk if Oracle fails to translate customer commitments into sufficient revenue to justify the investments. Therefore, prospective investors should monitor Oracle's ability to convert commitments into lasting profits before committing substantial capital.

Currently, Oracle holds a strong buy consensus rating among 42 analysts, with target prices suggesting an 87% to 206% upside potential over the next year. Although Oracle trades at approximately 20 times earnings, this valuation appears reasonable given its rapid growth in the cloud sector. As such, Oracle's current price decline could present a compelling entry point for long-term investors seeking exposure to this burgeoning AI-driven cloud market.