Monologue: Is Oracle Screwed?

shit worth it. Yet this has been a week for the more sophisticated haters, with Oracle stock plummeting on the news that it had to raise another forty five to fifty five billion dollars to fund data centers for open Ai, which timed poorly with a story running that in video was no longer doing its one hundred billion dollar investment in open Ai, something you will know was the case because it was on this podcast months ago and has

been multiple times since. To catch you one. Last September, Oracle announced the three hundred billion dollar, five year long deal to provide compute to open Ai, powered by four point five gigawatts of compute capacity that at the time and at this time did not and does not exist as far as I can tell, only two hundred megawats of Stargate Abilene, a project that's been a work in progress since twenty twenty four, appears to be complete, and to my knowledge as well, there's only like two hundred

megawats of power out there. They need a lot more than that. That's meant to be a one point two gigawat center. Not great now. Several other data center projects are allegedly in the works too, Stargate Shackleford, Texas and Wisconsin, Stargate New Mexico, and theoretically at least Stargate Michigan through Blue Owl, who invested in basically every Stargate project and

pulled out of Michigan due to financing conditions. Souring Oracle had previously raised fifty six billion dollars in bonds and debt, with thirty eight billion of that specifically yearmarked for Shackleford and Wisconsin. That debt is payable over four years, with two one year extensions and payments for interest only until

construc duction is complete. One little problem, I'm afraid. According to Jerome Darling at TD Cohen, it's upwards of forty two million dollars in megawatt to build a data center.

Completing these data centers is going to cost at least one hundred and eighty nine billion dollars for the four and a half gigawats an Oracle was and is short by quite some measure, so it sold twenty five billion dollars more in bonds and plans to sell another twenty billion dollars of stock in an at the money share sale, literally printing new shares and dumping them onto the market

in intervals set by the bankers behind the deal. Mathematicians in the audience have likely run the numbers at this point and worked out that this is only one hundred and one billion dollars, which is less than one hundred and eighty nine billion dollars. May seem obvious, but I don't know. The fucking markets don't appear to be able to count. Now. The other problem Oracle has is that the only way it can pay these loans off is if open Ai is able to pay them, and I

need to be clear how difficult that will be. That three hundred billion dollar, five year long compute deal guarantees that at least one year will be over eighty billion dollars in payments. For some context, the entire revenue of MICROSOFTS as your cloud in twenty twenty five was seventy five billion dollars. How does open ai pay that, especially when Oracles' build capacity but they don't have the money. They only allegedly made thirteen billion dollars last year and

lost nine billion dollars on top of that. How the hell do they pay this? I don't know, but everyone seems to think they will, or at least they did now. In video, of course, went out to say that they would absolutely be investing a lot of money in open AI's supposed upcoming round, this one hundred billion dollar one. Different to this one hundred billion dollar deal they were

talking about. Open ai is currently raising one hundred billion dollars allegedly, but in video is only putting twenty billion dollars in. And Jensen went on CNBC with Jim Kramer and had the most bizarre conversation I'll link to it in the episode notes. He was just saying, oh, yes, open ai is wonderful, cutting over Jim Kramer's Jim Kramer just said they going, well, you know, we love your deal.

Is to base to bash this deal ever, sounding like Sylvester the Cat, and Jensen is just cutting over him saying what open a ey is amazing. No drama, no drama at all. And let me tell you something. The reason he's saying no drama is because open ai also leaked a thing saying that that Sam Altman and open Ai were unhappy with in video chips, it's all so good. This is this is the kind of stuff that happens

when things are going well and well. Oracles saw this, and Oracles saw this back and forth, and they thought, we need to help, we need to help the markets. So they put out a tweet and I'm just going to read it to you. The in video open Ai deal has zero impact on our financial relationship with open Ai. We remain highly confident in open aiy's ability to raise funds and meet its commitments. Sadly, Oracles, the in video open Ai deal has zero impact on our financial relationship.

T shirt appears to have people asking them a lot of questions already answered by the shirt jokes aside, that's the kind of thing that Alex Wilhelm tech reporter said. It's bank run language. You don't that will always have the opposite effect saying, well, it's I said this on an interview recently. It's like walking into the room and saying I didn't fucking kill anyone. People are gonna people are probably gonna ask why you need to bring that

up at this time. The other part of that statement that got me was we're highly confident in open AI's

ability to raise funds. They're not paying this out of cash flow, so Oracle is just depending their entire existence on open AI's ability to raise some venture capitalists, it's all very good, it's all very very good, and it all times very very poorly, with a TD Cohen analyst letter that suggested Oracle would have to fire upwards of twenty five thousand people and potentially sell its valuable set

SNA healthcare IT infrastructure just to make it through. And again they paid twenty eight billion dollars with Serna, and TD Cohen said that would be eight to ten billion dollars worth of cash flow, again nowhere near one hundred and eighty nine billion dollars. Look, look, I need people to realize that Oracle cannot afford this out. It's committed to building ten gigawats of capacity for open Ai, meaning that on top of the one hundred and eighty nine

billion dollars it needs already. Oracle needs another two hundred and thirty one billion dollars just to build those data centers. And on its last earnings, Oracle had a cash flow of negative thirteen billion dollars. It's it's not looking very positive. And yes, Oracle also just bought TikTok, a business that

also but it loses billions and billions of dollars. And yes, Larry Ellison's wealth is almost entirely tied up in Oracle stock, which is currently hurtling towards hell with a velocity reserve for Thatcher and Reagan, I know you're gonna listen to this, and I hear from a lot of you. No matter how many times I say this, everyone's like, oh, the two deals are not about it's not about making money. It's about political influence. Wow, you're the first fucking person

to tell me that. No one has ever told me that other than the first one hundred and fifty fucking people. Not an original thought and also not a particularly effective one. The algorithm on ticketok is already shitting its pants because Oracle can't stop messing with it because they want to do the propaganda thing. And guess how TikTok makes money ads and how does TikTok show ads? Well, they keep you on the app with the algorithm. How do you

think this is gonna work? I know it all feels a little ridiculous, but there really is a future in which Oracle collapses. Larry Ellison's stock is entirely tied up in Oracle, and I just did a story called the Hater's God to Oracle in my premium newsletter that goes through this. But this is a company in a company, I'm just keeping it a company in decline, and they are really looking quite shaky. And even if they weren't in decline, the amount of money they're trying to spend

here is genuinely impossible for them to afford. They are going to have to stress the debt markets the levels they've never seen, and even then they cannot afford the payments unless open Ai can pay them more than anyone has ever paid for Cloud ever. Ah nah, I'm excited. I own to hold stock, and until we know more, I really only have one question. Is that good? H