Oracle does not have any proprietary IP that OpenAI depends on. That means Oracle is providing commodity services to OpenAI.
AI hardware is advancing rapidly. If NVIDIA's next generations deliver radically more tokens per watt and per dollar, an Oracle facility designed, financed, and contracted around an older GPU generation can be overtaken before it is fully online or fully monetized.
That's a big risk.
And to finance this they are making deep cuts to the ERP business where Oracle does have proprietary IP.
ERPs are done. Data center permits, space, contracts to buy scarse GPUs and energy are the moats today. The chips can provide more tokers per watt but the world needs exponentially more tokens each day
On strictly business terms, you're absolutely correct. Considering that OpenAI and Oracle both eat from Trump's hand though, I think that Larry Ellison has a few tricks up his sleeve to remain a "necessary" contractor. This is probably a shorter-term investment to pad out the coffers 5-10 years from now.
If rampant despotism is the end-goal, Oracle has already aligned themselves with the despots.
It's not dilutive -- current shareholders get $10B (or 97% of $10B, whatever). Market reaction is some combination of profitability concern / bankruptcy risk because Oracle is super leveraged and taking on even more debt. Maybe the AI hyperscalars will slow down spending in 2028.
Yes, even if the company raises $10b, the ownership stake and voting power of a share is reduced by 2.5%.
And if that $10b figure is a fixed target, then if the share price continues to fall, the more shares they will need to issue, resulting in even more dilution.
Previously, I thought investing in AI companies would be a good hedge against AI taking my job, but I hadn't considered the possibility that they fund the build out by issuing shares. Is there no reprieve?
maybe not. There could be mass unemployment and all the big dogs could also lose from the buildout while smaller players (non-public) take over. It could be a lycos / yahoo / google situation where there was no "winner" to invest in during the initial dotcom crash, and there was large-scale disruption all the same.
Oracle does not have any proprietary IP that OpenAI depends on. That means Oracle is providing commodity services to OpenAI.
AI hardware is advancing rapidly. If NVIDIA's next generations deliver radically more tokens per watt and per dollar, an Oracle facility designed, financed, and contracted around an older GPU generation can be overtaken before it is fully online or fully monetized.
That's a big risk.
And to finance this they are making deep cuts to the ERP business where Oracle does have proprietary IP.
ERPs are done. Data center permits, space, contracts to buy scarse GPUs and energy are the moats today. The chips can provide more tokers per watt but the world needs exponentially more tokens each day
On strictly business terms, you're absolutely correct. Considering that OpenAI and Oracle both eat from Trump's hand though, I think that Larry Ellison has a few tricks up his sleeve to remain a "necessary" contractor. This is probably a shorter-term investment to pad out the coffers 5-10 years from now.
If rampant despotism is the end-goal, Oracle has already aligned themselves with the despots.
I would assume it's to hire more lawyers.
Half of that would be in stocks, resulting in 2.5% dilution for shareholders at the current market cap. But the stock is down 8%.
It's not dilutive -- current shareholders get $10B (or 97% of $10B, whatever). Market reaction is some combination of profitability concern / bankruptcy risk because Oracle is super leveraged and taking on even more debt. Maybe the AI hyperscalars will slow down spending in 2028.
It’s literally dilutive. Current shareholders now only own 97.5% of the equity instead of the 100% they owned previously.
Yes, even if the company raises $10b, the ownership stake and voting power of a share is reduced by 2.5%.
And if that $10b figure is a fixed target, then if the share price continues to fall, the more shares they will need to issue, resulting in even more dilution.
Previously, I thought investing in AI companies would be a good hedge against AI taking my job, but I hadn't considered the possibility that they fund the build out by issuing shares. Is there no reprieve?
maybe not. There could be mass unemployment and all the big dogs could also lose from the buildout while smaller players (non-public) take over. It could be a lycos / yahoo / google situation where there was no "winner" to invest in during the initial dotcom crash, and there was large-scale disruption all the same.
The dotcom crash has nothing to do with the AI build out
Not for people like us.
It actually is but very few people realized that yet. We are still at "it doesn't work it's a fluke" denial phase
Broadcom is waiting to buy up the pieces.
Skynet finally? (Terminator movie used Oracle building as Skynet HQ, forgot which one)
We are b-roll in the skynet/oracle cinematic universe.
Misread the title at first as "to finance AI bailout".
LOL.. It is that under the cover.
I hope nothing but the worst for Oracle as a corporation...though nothing against the technical talent there.
Of all the companies in the world this is one of the ones I root against the hardest. Hoping for the worst outcome on this investment.
Do not make the mistake of anthropomorphizing Larry Ellison!
LOL..
Yeah I hope they get bought by Broadcom, like VMWare and the board sends Larry straight to retirement.