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Oracle is underwater on its $300B OpenAI deal
https://archive.ph/Qdf2n https://archive.ph/Qdf2n
- esafak 11mo agohttps://archive.is/Qdf2n https://archive.is/Qdf2n
- onetokeoverthe 11mo ago[dead]
- xtoilette 11mo agoTime to short major stocks?
- haberdasher 11mo agoYou're 2 weeks late.
- ekjhgkejhgk 11mo agoLOL the drop from 2 weeks ago is about 4%.
- whattheheckheck 11mo agoLet it ride
- supportengineer 11mo agoDiamond hands
- LunaSea 11mo ago-20% in the last month
- deleted 11mo ago[deleted]
- nawgz 11mo agoDidn't they pop like 30% at last earnings? Anyways, one stock in 1 month is irrelevant, look at SPY...
- btbuildem 11mo agoTime to put your RRSP / 401k in cash, it's all starting to seriously teeter.
- supportengineer 11mo agoWell, bonds should be OK. CDs, Treasuries, etc
- nickff 11mo agoThis used to be the case, but bonds have been positively correlated with stocks in recent years, so they have not been an effective hedge. Additionally, it seems possible/likely that we are headed into the long-predicted COVID stagflation, where growth is slow, so interest rates are low, but inflation remains high, which makes bonds unappealing.
- barchar 11mo agoCDs (and I-bonds) are very different instruments than bonds. If "bad things" happen and rates go down the CD will not appreciate in value like the bond will.
- donavanm 11mo agoBad news, 60/40 isnt a diversification strategy the last few years. 1) positive correlation in equity and fixed income 2) US treasuries/dollars have not had a “flight to safety” bump when volatility/l or bad news happens recently 3) treasuring moving to “all” short term debt, short term rate cuts resulting in long term rate increases.
- steine65 11mo agoI 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...
- deleted 11mo ago[deleted]
- Analemma_ 11mo agoMaybe, 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.
- harshalizee 11mo agoOracle 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 11mo agoSo you’re saying there’s an upside?
- marcosdumay 11mo agoMaybe 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.
- ramesh31 11mo 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. This has seriously crossed my mind as well. Like we've reached an endgame here where big tech has now found a way to literally burn off trillions of dollars into waste heat.
- dipsheetpatel 11mo ago>fraudster excuse me sweaty, AGI is actually around the corner
- coffeemug 11mo agoIn a universe where all AI investment goes to zero, wouldn’t you have the opposite effect? You can torch wealth but not the money supply, which ultimately _increases_ inflation, not decreases it. There is only a short term inflation decrease while we produce what people mistakingly think is wealth. That can evaporate, but the money supply won’t.
- 11mo ago
- James_K 11mo agoWhoda thought that agreeing to build $300 billion of infrastructure for a company with $20 billion revenue and zero profit was a bad idea?
- drivebyhooting 11mo agoIt’s looking like Google may outdo OpenAI. ChatGPT has brand recognition and adoption, but not the best product anymore.
- bhouston 11mo 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 11mo agoBut 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 11mo ago> Companies with worse products win all the time based on brand and adoption. Like google.
- Bricejm 11mo agoGoogle also has $100 billion in profit each year from it's core business to wait out OpenAI.
- iammjm 11mo agoHow is this even rational that companies "invest" billions of dollars that they dont even have? capitalism ad2025 is a joke
- marcosdumay 11mo 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.
- Am4TIfIsER0ppos 11mo agoWait until you discover that the bank doesn't have those dollars in your account.
- astrange 11mo agoIt mostly does. Treasuries are a kind of dollar.
- Am4TIfIsER0ppos 11mo agoThey could cash out everyone's account from the Scrooge McDuck pile of gold in the vault?
- throwacct 11mo agoso, these companies are playing hot potato and this is oracle holding it.
- rwmj 11mo agoPlease let it be true.
- reactordev 11mo agoI 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.
- outside1234 11mo agoExactly, 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.
- drivebyhooting 11mo agoIt would be an Adam Neumann moment. There’s no way OAI can IPO with its current financials.
- LeifCarrotson 11mo agoIn more ways than one - I don't know how, but I predict that Sam, like Adam, would somehow still walk away a billionaire while the company imploded.
- thway15269037 11mo agoIsn't it the whole point of current AI environment? "We can't, we shouldn't, yet we did and look at our stock". I won't bet anything at it but the whole thing, the whole AI economy looks like a big YOLO, so taking another step further into this insanity is, well, just another step. Who knows, maybe next day Beff Jezos will IPO newly established company and somehow pull 1T IPO in 10 days of company existence. Wouldn't it be a sight?
- TheAlchemist 11mo agoOne 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'.
- prewett 11mo agoTraditionally 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 11mo agoAlphabet at least returns capital via huge buybacks that effectively act as dividends, but with more tax efficiency.
- lotsofpulp 11mo agoWhy would it be in fashion? If you want the money, then sell your shares and don't cause a taxable event for everyone else.
- prewett 11mo agoA dividend is one mechanism for financial rigor and focus, since shareholders don't like dividends being cut. Having large piles of cash lying around is a temptation to use it for sub-optimal returns, or even worse, empire-building. Another reason is that the shareholder functions more like an owner. Without a dividend the managers have a less clear responsibility to the shareholders. Maybe they act wisely, maybe not, but there is no real constraints on their behavior. The stock then acts more like a lottery ticket than owning a business, because you don't get anything out until you sell. Whereas, if the company pays you something because you own shares and therefore you own a piece of the profits, the ownership structure and the management structures line up better.
- andrenotgiant 11mo agoFT 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.
- almostkindatech 11mo agoFT 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.
- almostkindatech 11mo agoAnd 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.
- tacker2000 11mo agoYea 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 11mo agoThe 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.
- Spooky23 11mo agoThe 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.
- bigiain 11mo agoIs 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 11mo agoDo you mean the bg2 pod interview?
- lateforwork 11mo agoOracle 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 11mo agoI mean that doesn’t have a $0 cost.
- johannes1234321 11mo agoIt'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.
- nikcub 11mo agothey also have to find and sign large-scale and long-term power supply deals
- killingtime74 11mo agoSo given depreciation and interest they are negative
- mgh95 11mo agoThe 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 11mo 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 11mo agoAs 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-epoch 11mo agoSo you shorted Oracle and made money?
- HWR_14 11mo agoKnowing a stock is overpriced and knowing when it will correct precisely enough to profit are very different.
- Karrot_Kream 11mo agoSure but everyone knows when earnings happens. If you think something is overpriced and a new balance sheet liability will "show" it, shorting around after earnings with something simple (a hedged short or a put) isn't that hard. If not you're just doing the social media thing where you say opinions that the peanut gallery is likely to agree with and smash the upvote button. I guess it's safer to fish for upvotes than money?
- throwaway290 11mo agothe market will be irrational longer than you are solvent;)
- Karrot_Kream 11mo agoAnd social media will upvote the preferences of the community over the truth until the heat death of the universe. This quote is the dumbest thing. There are traders at firms that make money from the market every day. Chances are you may even benefit from products these traders sell to more risk averse people. It's totally fine to say something like "I'm worried that the actual products that the AI boom are producing won't generate enough revenue to justify these levels of investment." But the silly doomshilling happening constantly makes no sense. Perhaps more saliently, if you treat the market as a source of economic information, the doomshilling seems to offer no new information at all.
- zombiwoof 11mo ago[dead]
- elzbardico 11mo ago[flagged]
- lizknope 11mo agoI 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?
- outside1234 11mo agoGoogle is going to nuke OpenAI from orbit within the year, so hard to imagine these datacenters will be finished when OpenAI implodes.
- Havoc 11mo agoThe plan is to charge per core...tensor core
- arisAlexis 11mo agoSo 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_1111 11mo agoHow 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
- arisAlexis 11mo agoIt 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 11mo agoI am Joe's complete lack of surprise.
- CodeWriter23 11mo agoI 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 11mo agoMusk 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...
- watwut 11mo agoAs he should be booed off the stages in any respectable society. Regardless of whether he is right or wrong about ai.
- etamponi 11mo 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.
- brazukadev 11mo agobooing is also covered by free speech.
- etamponi 11mo agoI might be misunderstanding what booing means then. My understanding is covering another person's voice with shouts in order to sabotage his speech. It might indeed be part of what some society might define free speech, but I'd consider it more of a coward form of violence. If with "booing" you mean "disrespect whatever good idea a person has because it also has very bad ideas", then I wonder who we will end up respecting. Even I have ideas I end up discovering bad. Should I boo myself and ignore everything else I say? If I am missing another definition of booing then I am sorry.
- decimalenough 11mo agoThis 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/baa236e2a4d94d45fe938bc4d62646221a6cfa12.avif https://d9j0pm70mrv84f.archive.is/Qdf2n/baa236e2a4d94d45fe93...
- badrequest 11mo agoItanium sales projections vibes
- AbstractH24 11mo ago>Itanium sales projections vibes We should be so lucky as to compare 2025 to 1997, when Itanium and its projections were announced.
- tacker2000 11mo agoFeels a bit like Elons 1tn deal
- tombot 11mo agoCouldn’t happen to a nicer bunch of crooks
- elzbardico 11mo agoSince QE and Zirp and then Covid stimulus money stopped making sense. It is fucking too much money in a few hands.
- jMyles 11mo agoThere 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?
- onesociety2022 11mo agoTiktok, Zoom and Uber use Oracle Cloud.
- broknbottle 11mo agoSam Altman-Fried
- octoberfranklin 11mo agoScam Bankrun Fraud?
- zombot 11mo agoI just hope those AI scammers all crash and burn.
- AbstractH24 11mo agoIt'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 11mo agoThe 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
- AbstractH24 11mo agoI think Oracle would disagree.
- tguedes 11mo agoBut that's the problem with this. The vast majority of the spend is going to be on the Nvidia chips which have a shelf life of 3-5 years. They are not making any significant long term investments. During the dot com bubble, telecom companies spent 10s of billions of dollars laying down cables and building out the modern public internet infrastructure that we are still using today. Even if a lot of companies failed, we still greatly benefited from some of the the investments they made. For this bubble, the only long term investment benefits seems to be the electricity build out and a renewed interest and investment in nuclear. Most (if not all) of Oracle's investments are mostly in chips and data centers.