4 ms·

Oracle 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 ago
I mean that doesn’t have a $0 cost.
- johannes1234321 11mo ago
  It'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 ago
    they also have to find and sign large-scale and long-term power supply deals
killingtime74 11mo ago
So given depreciation and interest they are negative
mgh95 11mo ago
The 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.
  - lumost 11mo ago
    We’re talking about building 10x existing datacenter capacity to support you based ai workloads. There will be no other buyer if OpenAI goes bust.
  - mgh95 11mo ago
    > AI, even the relatively lackluster state we have today, has a ton of very useful usage cases that are actually working in the field. Useful use cases at what price? It's totally possible that after VC money dries up the price increases far beyond what customers (both business and consumer) have been paying, resulting in demand destruction rendering the investment a net negative for Oracle.
    - gunalx 11mo ago
      Not nessesarily. We have providers of hosted oss models (even large sota ones), with competitive API pricing. They have no reason to subsidice their services, outside og initial market grab. But there is so many of them that it dosent look to bad. Also buisnisses have invested to host things locally themselves as well.
      - mgh95 11mo ago
        > Not nessesarily. We have providers of hosted oss models (even large sota ones), with competitive API pricing. They have no reason to subsidice their services, outside og initial market grab. But there is so many of them that it dosent look to bad. That price is holding at the current demand ratio of GPU availability/consumption. If the large companies such as OpenAI and Anthropic cease training new models and accepting loss-leader lines of business such as free consumer inference there is a reasonable chance of a GPU glut. This GPU glut may drive down prices Oracle can command for their cloud services. The fundamental problem is not the market as it stands today. The problem is where will the market equilibrium shift from increased capacity and reduced demand due to VC subsidy reduction.
    - kvam 11mo ago
      That might be precisely why OpenAI is pushing an over investment in infrastructure. When VCs are no longer willing to substitute compute, having more compute available than natural demand will drive the prices down.

650REDHAIR 11mo ago

I mean that doesn’t have a $0 cost.

johannes1234321 11mo ago
It'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 ago
  they also have to find and sign large-scale and long-term power supply deals

killingtime74 11mo ago

So given depreciation and interest they are negative

mgh95 11mo ago

The 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.
- lumost 11mo ago
  We’re talking about building 10x existing datacenter capacity to support you based ai workloads. There will be no other buyer if OpenAI goes bust.
- mgh95 11mo ago
  > AI, even the relatively lackluster state we have today, has a ton of very useful usage cases that are actually working in the field. Useful use cases at what price? It's totally possible that after VC money dries up the price increases far beyond what customers (both business and consumer) have been paying, resulting in demand destruction rendering the investment a net negative for Oracle.
  - gunalx 11mo ago
    Not nessesarily. We have providers of hosted oss models (even large sota ones), with competitive API pricing. They have no reason to subsidice their services, outside og initial market grab. But there is so many of them that it dosent look to bad. Also buisnisses have invested to host things locally themselves as well.
    - mgh95 11mo ago
      > Not nessesarily. We have providers of hosted oss models (even large sota ones), with competitive API pricing. They have no reason to subsidice their services, outside og initial market grab. But there is so many of them that it dosent look to bad. That price is holding at the current demand ratio of GPU availability/consumption. If the large companies such as OpenAI and Anthropic cease training new models and accepting loss-leader lines of business such as free consumer inference there is a reasonable chance of a GPU glut. This GPU glut may drive down prices Oracle can command for their cloud services. The fundamental problem is not the market as it stands today. The problem is where will the market equilibrium shift from increased capacity and reduced demand due to VC subsidy reduction.
  - kvam 11mo ago
    That might be precisely why OpenAI is pushing an over investment in infrastructure. When VCs are no longer willing to substitute compute, having more compute available than natural demand will drive the prices down.