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Here's some evidence: Oracle's share price recently went up 40% on an earnings miss, because apart from the earnings miss they declared $455b in "Remaining Per

Here's some evidence: Oracle's share price recently went up 40% on an earnings miss, because apart from the earnings miss they declared $455b in "Remaining Performance Obligations" (which is such an unusual term it caused a spike in Google Trends as people try to work out what it means). Of the $455b of work they expect to do and get paid for, $300b comes from OpenAI. OpenAI has about $10b in annual revenue, and makes a loss on it. So OpenAI aren't going to be able to pay their obligations to Oracle unless something extraordinary happens with Project Stargate. Meanwhile Oracle are already raising money to fund their obligations to build the things that they hope OpenAI are going to pay them for. These companies are pouring hundreds of billions of dollars into building AI infrastructure without any good idea of how they're going to recover the cost.

mjburgess 1y ago
Pre-banking 30 years of a customer's net revenue is eron-level accounting
- fainpul 1y ago
  > eron-level Enron?
  - xnx 1y ago
    Elon?
    - votepaunchy 1y ago
      Has Elon taken down one of the five major accounting firms? https://en.wikipedia.org/wiki/Enron_scandal https://en.wikipedia.org/wiki/Enron_scandal
HAL3000 1y ago
It's a case of major FOMO. They would rather burn with the others who bet wrong than be the ones left behind.
fabian2k 1y ago
I'm slightly confused about how solid the expected revenue has to be to be counted as RPO. Does this mean OpenAI actually signed a contract binding them to spend those 300 billions with Oracle? The second interesting part is also the part you're assuming in your argument. Does the fact that OpenAI doesn't have 300 billions now and neither has the revenue/profit to generate that much matter? Unless there are deals in the background that already secured funding, this seems very shady accounting.
- jstanley 1y ago
  If I earnt £10k a year from my job, and I was spending more than £10k a year getting myself deeper in debt every year, I wouldn't go out and sign up for £300k of goods and services. But maybe that's just me. I guess we'll find out.
ajross 1y ago
> These companies are pouring hundreds of billions of dollars into building AI infrastructure without any good idea of how they're going to recover the cost. Well... to be fair it's only really Anthropic (and the also-ran set like xAI) that runs the risk of being over-leveraged. OpenAI is backstopped by Microsoft at the macro level. They might try to screw over Oracle, but they could pay the bill. So that's not going to move the market beyond those two stocks. And the other big players is obviously Google which has similarly deep pockets. I don't doubt that there's an AI bubble. But it won't pop like that, given the size of the players. Leverage cycles are very hard to see in foresight; in 2008 no one saw the insanity in the derivatives market until Lehman blew up.

mjburgess 1y ago

Pre-banking 30 years of a customer's net revenue is eron-level accounting

fainpul 1y ago
> eron-level Enron?
- xnx 1y ago
  Elon?
  - votepaunchy 1y ago
    Has Elon taken down one of the five major accounting firms? https://en.wikipedia.org/wiki/Enron_scandal https://en.wikipedia.org/wiki/Enron_scandal

HAL3000 1y ago

It's a case of major FOMO. They would rather burn with the others who bet wrong than be the ones left behind.

fabian2k 1y ago

I'm slightly confused about how solid the expected revenue has to be to be counted as RPO. Does this mean OpenAI actually signed a contract binding them to spend those 300 billions with Oracle? The second interesting part is also the part you're assuming in your argument. Does the fact that OpenAI doesn't have 300 billions now and neither has the revenue/profit to generate that much matter? Unless there are deals in the background that already secured funding, this seems very shady accounting.

jstanley 1y ago
If I earnt £10k a year from my job, and I was spending more than £10k a year getting myself deeper in debt every year, I wouldn't go out and sign up for £300k of goods and services. But maybe that's just me. I guess we'll find out.

ajross 1y ago

> These companies are pouring hundreds of billions of dollars into building AI infrastructure without any good idea of how they're going to recover the cost. Well... to be fair it's only really Anthropic (and the also-ran set like xAI) that runs the risk of being over-leveraged. OpenAI is backstopped by Microsoft at the macro level. They might try to screw over Oracle, but they could pay the bill. So that's not going to move the market beyond those two stocks. And the other big players is obviously Google which has similarly deep pockets. I don't doubt that there's an AI bubble. But it won't pop like that, given the size of the players. Leverage cycles are very hard to see in foresight; in 2008 no one saw the insanity in the derivatives market until Lehman blew up.