Oracle is underwater on its $300B OpenAI deal

I don't think so. Trump just announced $2K stimulus checks, and he could do it again. Money printing will reduce the value of the dollar. You're probably better off buying real estate or gold. Though those are priced really high now too. Maybe just invest in yourself to gain knowledge and skills that will eventually pay off...

Analemma_• 8 months ago

Maybe, but not Oracle. Oracle is friends with the regime: Larry Ellison's kid runs TikTok and has promised to use it to push more conservative content. They'll get bailed out.

mmooss• 8 months ago

Larry Ellison's kid runs TikTok

Also Paramount, which owns CBS News among other things. And they are looking to acquire the parent company of CNN.

yahoozoo• 8 months ago

“Conservative” meaning pro-Israel.

harshalizee• 8 months ago

Oracle is the one to look out for if/when the bubble bursts. Most of the big tech will be fine, albeit hurting for a while. For Oracle, this might be existential.

symfoniq• 8 months ago

So you’re saying there’s an upside?

marcosdumay3• 8 months ago

Maybe the entire purpose of OpenAI was to suck all the inflation the US government created on the last decade and burn it out in a huge bonfire at the end of its life.

Sam Altman has been playing 6-D chess this entire time, and we thought he was just a fraudster.

matsz2• 8 months ago

Finally, been waiting for this moment since I've learned about Oracle. Would be well-deserved for them. Hope Larry Ellison loses his yacht.

water-data-dude• 8 months ago

But there would be other consequences too, just consider the philanthropic organizations that Larry Ellison supports! Like the Ellison Medical Foundation, a non profit whose sole purpose is to keep Larry Ellison alive as long as possible!

hypeatei• 8 months ago

These people are in the class that never fails. Ellison won't lose anything.

onesociety20222• 8 months ago

Larry Ellison owns 40% of Oracle ($625B market cap) as of today. So even if Oracle tanks and becomes a $60B company (10% of what is worth today), Larry will still be a billionaire worth $25B. He will keep his private islands and yachts.

jandrese• 8 months ago

Don't they still sell a database product? As long as they don't do the Venture Capital thing and sell off the most promising business units there should still be something for the company to do after the AI bubble implodes. Certainly there will be a lot of layoffs, and maybe even a chapter 13, but I don't think they'll stop existing.

chasil• 8 months ago

Oracle Database Enterprise Edition retails at $47,500 per CPU core (there is a 2-for-1 discount on x86) when licensed this way.

There is extreme caution in deploying new Oracle databases, more so than SQL Sever.

raw_anon_11113• 8 months ago

To a first approximation, no new company says “after looking at all of the alternatives, I think we should choose Oracle!”

Also when was the last time you heard companies migrating to Oracle from any DB?

blibble• 8 months ago

unfortunately their database continues to print money from trapped customers

the "AI" is just an attempt to pump the stock price

OpenAI though can't survive as there's no business at all to fall back on

lifestyleguru2• 8 months ago

Oh god, that'd be finally some good news in this recent brutal and sad time period.

James_K• 8 months ago

Whoda thought that agreeing to build $300 billion of infrastructure for a company with $20 billion revenue and zero profit was a bad idea?

drivebyhooting2• 8 months ago

It’s looking like Google may outdo OpenAI.

ChatGPT has brand recognition and adoption, but not the best product anymore.

bhouston• 8 months ago

ChatGPT has brand recognition and adoption, but not the best product anymore.

Companies with worse products win all the time based on brand and adoption. So it isn't clear to me at all that Google can win.

imglorp• 8 months ago

But what does win mean here? It's commoditized at this point, everyone's got options, and it's easy to swap models. This means the user share will be spread out among the different offerings. There's no winner take all scenario.

blitzar• 8 months ago

Companies with worse products win all the time based on brand and adoption.

Like google.

Bricejm• 8 months ago

Google also has $100 billion in profit each year from it's core business to wait out OpenAI.

LunaSea2• 8 months ago

And the search engine and crawler actually powering these LLMs

beachy• 8 months ago

Google is also conflicted though.

The more they emulate ChatGPT's clean UI, the more they are failing to push ads in people's faces, which is what generates that $100B for them.

Their business model fails if their users don't experience a confusing crap-fest of ads.

rvnx• 8 months ago

And they also have their own chips (TPUs), no need for Nvidia

YetAnotherNick• 8 months ago

If you remove AGI dream from the equation, AI revenues couldn't come close everpresent ads on the internet which Google has monopoly over, and LLM directly affects Google core business.

Also Google doesn't have great business reputation for sticking to their APIs, so they need to be lot better than open model always, which it is now but my guess would be it wouldn't be for long.

keiferski3• 8 months ago

Unless I’m missing something, Google doesn’t really have the “chat journal” aspect that ChatGPT has. It’s just a search engine.

For me personally this is a major feature.

esafak2• 8 months ago

What's a chat journal besides a history, which Gemini has?

spankalee• 8 months ago

https://gemini.google.com/

ElectricalUnion2• 8 months ago

NotebookLM?

lateforwork3• 8 months ago

What is the cost of delivering regular search results vs. answering an AI chat question? How do you sell ads through each of these channels?

If you consider those angles you'll see that Google does not want AI chat to replace Google search any time soon. Google is being dragged into this kicking and screaming. They are damned if they do, and damned if they don't.

Yossarrian22• 8 months ago

It’s interesting, it’s almost like if Kodak did end up making best in class digital cameras

dist-epoch2• 8 months ago

You can get a $20 OpenAI subscription for some serious usage.

Google has no such thing for Gemini, it's subscriptions are brain-dead, expensive bundled with 2 TB of storage and other shit that I don't want.

ohyoutravel• 8 months ago

Isn’t Gemini the same price for the same usage as OpenAI? I agree they bundle extra things in there, but you don’t have to use them. If you just used Gemini for $20 you’d be equally situated as OpenAI for $20 on the model front.

iammjm• 8 months ago

How is this even rational that companies "invest" billions of dollars that they dont even have? capitalism ad2025 is a joke

marcosdumay3• 8 months ago

billions of dollars that they dont even have

Companies don't ever "have" things, they are themselves things that people have. There isn't a fundamental difference between taking a loan smaller than their total capitalization or spend some money they have liquid at the bank. It's both taking money from the shareholders and spending on something.

That said, yes that investment is stupid and deserves quotes around the word. But making risky investments when the company is operating in the red isn't stupid at all... it's just that this one isn't risky, it's certainly bad.

Am4TIfIsER0ppos2• 8 months ago

Wait until you discover that the bank doesn't have those dollars in your account.

astrange4• 8 months ago

It mostly does. Treasuries are a kind of dollar.

HWR_142• 8 months ago

If you can borrow money at X% and make (X+1)% on that money, you do that and invest it. As an individual you can do that by buying stocks on margin.

astrange4• 8 months ago

You can also do it by buying risky stocks and pretending you're buying alpha!

throwacct• 8 months ago

so, these companies are playing hot potato and this is oracle holding it.

reactordev• 8 months ago

I so desperately want to make a snide comment about foreseeing the future but the reality is the CapX is so muddied that I’m afraid everyone is going to feel it.

outside12342• 8 months ago

Exactly, the really frightening thing is Altman taking OpenAI public to get it into the SP500 and it completely falls apart then. In that case, we all get to hold the bag.

wmf2• 8 months ago

Oracle doesn't own the GPUs themselves and may hold as little as 10% of the Stargate bag.

rwmj• 8 months ago

Please let it be true.

TheAlchemist• 8 months ago

One must love the projections of >50% YOY growth for 5 straight years.

Why not continue for the next 5 ? Maybe they will find customers on Mars.

This while situation is very strange - there are some big companies pouring tens of billions into it (Alphabet, Meta) - since they don't have anything better to do with the money printers they have, but there are several others whose valuations are based on completely unrealistic projections where their expected revenues in 5-10 years represent 99% of their current 'value'.

prewett2• 8 months ago

Traditionally one is supposed to return money you don’t have anything better to do with to shareholders in dividends, but that is sadly out of fashion with tech companies.

brainwad• 8 months ago

Alphabet at least returns capital via huge buybacks that effectively act as dividends, but with more tax efficiency.

lotsofpulp• 8 months ago

Why would it be in fashion? If you want the money, then sell your shares and don't cause a taxable event for everyone else.

andrenotgiant• 8 months ago

FT uses "underwater" because the deal was $300 Billion and the stock has lost $315 Billion in market cap since the deal. That's a bit of a stretch, but the rest of the article is very good.

almostkindatech2• 8 months ago

FT Alphaville is the (very good) blog-style section of the FT, so this point is meant slightly tongue-in-cheek, as Bryce hints at himself.

almostkindatech2• 8 months ago

And as it won't be obvious to everyone here: Alphaville is one of the few free parts of FT online. You need to create an account to access it, but don't need a paid subscription.

tacker20002• 8 months ago

Yea these market cap discussions are always a bit meaningless actually, stocks can be volatile for many reasons… its not like they actually lost the delta

chrisgd• 8 months ago

The market (over)reacted to the OpenAi announcement sending Oracle’s share price up and now may be overreacting to Altman’s interview with an investor pushing their stock price down. And we are measuring (what seems like) a non-binding investment against market cap which swings everyday.

Spooky232• 8 months ago

The market is priced for perfection. Delivery is underwhelming. I think the audacity and hijinks of Altman, Musk, the Trump whack pack, Theil, etc in this zero regulatory environment is starting to wear thin on Wall St.

The honest players like NVidia, Micron, Microsoft, Meta and Google who are shipping product or making money with this tech. IMO there’s a non-zero probability that OpenAI and the “Elon cinematic universe” are Enron style disasters.

The SEC is essentially gone. Their contracts with FINRA mostly cancelled. You can’t invest like it’s 2024.

NuclearPM• 8 months ago

Why do people say “non-zero probability” instead of “chance” or “possibility”?

bigiain• 8 months ago

Is it just me, our does this feel like the AI grifters doing the same market manipulation tricks that their new best friends (or their past selves) the Crypto Currency grifters used, only this time with private company stock price insane valuation deals instead of magical internet money beans?

arresin• 8 months ago

Do you mean the bg2 pod interview?

lateforwork3• 8 months ago

Oracle has no IP in this deal. All they are doing is unpacking Nvidia servers, plugging it in, and keeping them cool. They get 15% markup for this.

650REDHAIR• 8 months ago

I mean that doesn’t have a $0 cost.

johannes1234321• 8 months ago

It's real upfront cost. They got to build the DCs and put in the hardware.

OpenAI's side of those deals are just announcements, which may become real. Or not.

killingtime74• 8 months ago

So given depreciation and interest they are negative

mgh953• 8 months ago

The market is pricing in significant counterparty risk. It's possible Oracle does the buying, unpacking, and cooling of Nvidia servers and doesn't get paid.

mschuster91• 8 months ago

It's possible Oracle does the buying, unpacking, and cooling of Nvidia servers and doesn't get paid.

The beauty of being a cloud infra provider is you're selling shovels. OpenAI going bust? Doesn't matter too much for Oracle, there will always be someone willing to pay them for GPU compute capacity.

Even if the hype behind AI dies down, which I hope it does rather sooner than later, the fundamental aspects aren't vaporware like with the cryptocurrency craze - AI, even the relatively lackluster state we have today, has a ton of very useful usage cases that are actually working in the field.

LASR• 8 months ago

As someone paying some vague attention to market movements, this was predictable.

News of a deal and hype was largely responsible for the rise. Now that the sentiment is cooling off, it’s dropping back to a more reasonable level.

dist-epoch2• 8 months ago

So you shorted Oracle and made money?

HWR_142• 8 months ago

Knowing a stock is overpriced and knowing when it will correct precisely enough to profit are very different.

lizknope• 8 months ago

I see that the stock price jumped high on Sept 10 and is now back to where it was the day before.

So what is Oracle spending the $300B on? Did they get any percentage ownership of OpenAI? Is it building out the cloud hardware data center? Can anyone other than OpenAI use it?

outside12342• 8 months ago

Google is going to nuke OpenAI from orbit within the year, so hard to imagine these datacenters will be finished when OpenAI implodes.

Havoc• 8 months ago

The plan is to charge per core...tensor core

arisAlexis2• 8 months ago

So this economist is saying that a deal is only good if it raises the subjective share price? That is some distorted world view of finance that aims to just repeat the ai bubble narrative that is popular these days

raw_anon_11113• 8 months ago

How is that “distorted”? The classic evaluation of a stock is (yeah I’m simplifying) is the present value of all future returns. If a deal doesn’t increase expectations of future returns, it would seem to be the market showing its lack of confidence in the deal

arisAlexis2• 8 months ago

It shows the market's lack of confidence but this is subjective. You can never say if the deal is underwater until the deal is completed and results are shown! The article says exactly this!

HardwareLust• 8 months ago

I am Joe's complete lack of surprise.

CodeWriter23• 8 months ago

I seem to recall Musk saying something about OpenAI being over-valued/under-funded earlier this year. Of course he was summarily booed off the stage by the startup crowd.

inglor_cz• 8 months ago

Musk managed to attract so much negative attention that he is going to be booed no matter what.

I happen to agree with him re OpenAI...

watwut2• 8 months ago

As he should be booed off the stages in any respectable society. Regardless of whether he is right or wrong about ai.

etamponi3• 8 months ago

I disapprove of what you say, but I will defend to the death your right to say it.

This is _actually_ what a respectable society does.

nikkwong• 8 months ago

He says a lot of things. Just because some of them end up being true by happenstance doesn't make him a prophet.

wmf2• 8 months ago

Elon Musk is suing OpenAI over the for-profit conversion so that clouds his judgement.

decimalenough• 8 months ago

This slide from their investor preso is bonkers. $10B revenue today, but we promise we'll get to $166B in revenue in 5 years, by the simple expedient of growing 75% every year for five years!

https://d9j0pm70mrv84f.archive.is/Qdf2n/baa236e2a4d94d45fe93...

badrequest• 8 months ago

Itanium sales projections vibes

AbstractH243• 8 months ago

Itanium sales projections vibes

We should be so lucky as to compare 2025 to 1997, when Itanium and its projections were announced.

tacker20002• 8 months ago

Feels a bit like Elons 1tn deal

tombot• 8 months ago

Couldn’t happen to a nicer bunch of crooks

elzbardico• 8 months ago

Since QE and Zirp and then Covid stimulus money stopped making sense. It is fucking too much money in a few hands.

jMyles• 8 months ago

There has never been a moment that I've truly understood how Oracle stays in business.

I snuck into "Oracle Openworld" in 2011, and it was just the most drunken, debaucherous event. I had just come from Djangocon in Portland, and the contrast was incredible - Djangocon which was _much_ more chill, focused on collaboration - more full of weed, whereas the Oracle thing was liquor and cocaine, and I had the distinct feeling that few people there were mulling over any product notions whatsoever.

Is it just legacy db support? Can that really explain this? They have window shopped acquisitions for a decade now - do they have a stack which new customers are approaching with serious esteem, and I just haven't heard about it?

onesociety20222• 8 months ago

Tiktok, Zoom and Uber use Oracle Cloud.

broknbottle• 8 months ago

Sam Altman-Fried

octoberfranklin• 8 months ago

Scam Bankrun Fraud?

zombot• 8 months ago

I just hope those AI scammers all crash and burn.

AbstractH243• 8 months ago

It's been 2 months. Certianly not a worthwhile time horizon to judge this investment over.

The apartment I bought 3.5 years ago is worth less than when I purchased. But buying an apartment if you plan to sell after 3.5 years is nuts. I'm confident it'll be worth more than I bough 7 or so years from now.

Also, 3.5 years ago, interest rates were significantly lower. I hadn't taken the opportunity to buy when I did, getting into the market would cost me much more and my eventual returns would be much lower.

TremendousJudge• 8 months ago

The apartment you bought also actually exists and you live in it (or somebody else does, same point). This isn't really the case with this investment

AbstractH243• 8 months ago

I think Oracle would disagree.

Oracle is underwater on its $300B OpenAI deal

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