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.
> 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.
Every user of Nvidia's gear has thought of this, and Nvidia provides a solution: Newer components are (usually) compatible with older racks, and Nvidia will buy back parts you replace with newer hardware.
For example, let's say you have an NV72 with Blackwell-ultra. Rubin comes out, and you decide you want to upgrade. There is a SKU of Rubin designed specifically to work in the racks shipped with Blackwell. Use it, and you only need to replace the compute board (not the power system, cooling, networking, etc.)
Nvidia will buy back the Blackwell boards you remove (and sell them to someone else, with a warrantee).
If you want to do an upgrade that increases power use, you may have to get a new rack. All of the parts are modular, and all parts can be sold back to Nvidia.
Nvidia does this because they have to. Without it, many customers would consider other vendors when upgrading, or delay purchases in case something better comes along later.
I'm no fan of Oracle, but you could make the same claim about land developers, or datacenter operators, or REITs. Or a random conglomerate like Unileaver or GE or Siemens.
Ultimately, someone has to provide "commodities", and if you think your ship is the right vessel to do it betting hard on this is some kind of strategic direction.
Whether they are right, and to what extent debtors and the market will put up with cyclic and performance issues, etc.. I certainly won't hold the stock, but I wouldn't have earlier either.
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
Curious to know why you think ERPs are done. I actually do somewhat agree with you in that their best days are behind them.
It is going to be incredibly difficult to bill outrageous amounts for armies of consultant to implement or customise the product when agents can do the same for much less, or at-least a 5-10x reduction in headcount for similar complexity of changeset.
If anyone is in the industry, please feel free to chime in as to what you are seeing on the ground.
>Oracle does not have any proprietary IP that OpenAI depends on. That means Oracle is providing commodity services to OpenAI.
Huh? Is Oracle's plan with this funding to provide compute services for the big AI specialist companies? I assumed it was a buildout for their own AI services, as you're right, the former wouldn't make sense. (At risk of making a trollish, low-effort comment, OpenAI/Anthropic are savvy compute users and would have to be insane to risk getting entangled with Oracle.)
I read the article and I couldn't tell from it which of these is the case.
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.
A company that is purely in Denial, even doubling down at the risk of toppling the whole financial system should be placed under the financial equivalent of arrest and its leadership actually arrested. They're obviously playing with fire and it's alarming that no one's in the administration is batting an eye.
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.
I'd like to note that "the sector that employs you" should be part of any diversification planning.
A stretch of unemployment can be weathered with good investments, and depressed investments can be weathered by staying employed, but both together forces people to "sell low".
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.
> an Oracle facility designed, financed, and contracted around an older GPU
> generation can be overtaken before it is fully online or fully monetized.
Every user of Nvidia's gear has thought of this, and Nvidia provides a solution: Newer components are (usually) compatible with older racks, and Nvidia will buy back parts you replace with newer hardware.
For example, let's say you have an NV72 with Blackwell-ultra. Rubin comes out, and you decide you want to upgrade. There is a SKU of Rubin designed specifically to work in the racks shipped with Blackwell. Use it, and you only need to replace the compute board (not the power system, cooling, networking, etc.)
Nvidia will buy back the Blackwell boards you remove (and sell them to someone else, with a warrantee).
If you want to do an upgrade that increases power use, you may have to get a new rack. All of the parts are modular, and all parts can be sold back to Nvidia.
Nvidia does this because they have to. Without it, many customers would consider other vendors when upgrading, or delay purchases in case something better comes along later.
Ultimately, someone has to provide "commodities", and if you think your ship is the right vessel to do it betting hard on this is some kind of strategic direction.
Whether they are right, and to what extent debtors and the market will put up with cyclic and performance issues, etc.. I certainly won't hold the stock, but I wouldn't have earlier either.
It is going to be incredibly difficult to bill outrageous amounts for armies of consultant to implement or customise the product when agents can do the same for much less, or at-least a 5-10x reduction in headcount for similar complexity of changeset.
If anyone is in the industry, please feel free to chime in as to what you are seeing on the ground.
Huh? Is Oracle's plan with this funding to provide compute services for the big AI specialist companies? I assumed it was a buildout for their own AI services, as you're right, the former wouldn't make sense. (At risk of making a trollish, low-effort comment, OpenAI/Anthropic are savvy compute users and would have to be insane to risk getting entangled with Oracle.)
I read the article and I couldn't tell from it which of these is the case.
If rampant despotism is the end-goal, Oracle has already aligned themselves with the despots.
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.
A stretch of unemployment can be weathered with good investments, and depressed investments can be weathered by staying employed, but both together forces people to "sell low".
If we did anthropomorphize people like him, he'd be in a lot more trouble than he is. Instead we legally and socially treat him like a lawnmower.