This 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!
FT 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.
And 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.
Yea 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
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.
> 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.
> 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.
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.
> 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.
Their customer base rapidly disappeared and they tried to paper over the losses with accounting fraud where they had fake sales of equipment because their actual customers disappeared. They had tons of equipment to sell with few customers left to buy them.
Problem is, those Nvidia servers are useless to anyone who needs servers already racked in a datacenter. They're purposely made purely to run LLMs, and anything else would be a waste of time.
Nvidia is also fucking over anyone who buy these: datacenters depend on used hardware sales to recoup cost, sometimes getting up to half of what they originally paid for the hardware.... this hardware has no resale value.
It's literally garbage the moment it leaves the factory.
> datacenters depend on used hardware sales to recoup cost
Who? Ive worked for few big infra companies with millions to billions of DC assets. After depreciation and then some, say 3-5 years, theyre effectively scrap. Its more cost effective to buy new, denser, racks than continue to MRC on the stranded space and power. The reseller is cheaper/easier effectively paid to scrap the parts as e-waste and recover what they can.
> there will always be someone willing to pay them for GPU compute capacity.
There is an hourglass shape to emerging technologies. Everyone uses commodity hardware and duct tape to try to win the race to the bottleneck, where everyone save 2 companies goes bankrupt. As it narrows companies have learned enough about the problem to start developing purpose built solutions. Once you pass the bottleneck enough of your engineers go to other companies that the custom solution becomes mainstream and competition grows again.
Google was working on custom chips for AI before we knew it was AI. They are going to survive either as the dominant player in AI or as the underlying platform everyone else builds on.
That leaves one other spot for everyone else racing to the eye of the needle. Anyone betting on Oracle to win on technology is silly, betting on Oracle with a bunch of generic GPUs that anyone can get is down right dumb.
The 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.
The 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.
Is 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?
They don't have to do that today, though. Remember original Google? Or original Gmail? Neither had prominent ads for the first few years, a couple decades later the ads are everywhere.
OpenAI isn't burning through tens of billions of dollars every year on its free tier for charity. It will dial up the advertising knob (and every other knob) to 11 the moment the cash starts to runs out.
How is it different than Google Summaries or AMP or any of the other ways Google tried to keep people from actually visiting the websites that drive all of their traffic.
I usually do the same, but not always. And I believe clicking through is a behavior of a minority of people and interactions, judging by the click through rate drops sites have seen recently. (On mobile at the moment, so apologies for not grabbing a source for the rate drops sites.)
But 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.
What is the cost of delivering regular search results vs. answering an AI chat question? How do you sell ads through each of these channels?
If you consider those angles you'll see that Google does not want AI chat to replace Google search any time soon. Google is being dragged into this kicking and screaming. They are damned if they do, and damned if they don't.
No, it is harder. Google doesn't just have to make the best AI chat, they also have to figure out how to make profit from it. That's something no one has figured out yet. Open AI can make a loss every year, but if Google makes a loss the stock is going to tank.
Isn’t Gemini the same price for the same usage as OpenAI? I agree they bundle extra things in there, but you don’t have to use them. If you just used Gemini for $20 you’d be equally situated as OpenAI for $20 on the model front.
If you remove AGI dream from the equation, AI revenues couldn't come close everpresent ads on the internet which Google has monopoly over, and LLM directly affects Google core business.
Also Google doesn't have great business reputation for sticking to their APIs, so they need to be lot better than open model always, which it is now but my guess would be it wouldn't be for long.
I 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.
Exactly, 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.
Isn'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?
I 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?
Sure 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?
And 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.
This is such a poor excuse for not being confident enough in your beliefs to put your own skin in the game. It's revealed preference vs. stated preference.
But in all likelihood, the people saying "I told you so!" never actually knew what they claimed to know.
If you want to know what someone actually believes, don't look at their comments, look at their positions.
Bad 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.
This 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.
CDs (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.
Maybe, 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.
One 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'.
Traditionally 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.
There 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?
Oracle 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.
But there would be other consequences too, just consider the philanthropic organizations that Larry Ellison supports! Like the Ellison Medical Foundation, a non profit whose sole purpose is to keep Larry Ellison alive as long as possible!
Larry Ellison owns 40% of Oracle ($625B market cap) as of today. So even if Oracle tanks and becomes a $60B company (10% of what is worth today), Larry will still be a billionaire worth $25B. He will keep his private islands and yachts.
Please stop. This kind of rage-posting is not what HN is for. It's fine to think whatever you want about Mr Ellison or any other tech luminaries, and criticize them for whatever you like. But commenting in this style does nothing to harm Ellison, whilst making HN a dismal place for your fellow community members who do actually read what you post.
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.
Sam Altman has been playing 6-D chess this entire time, and we thought he was just a fraudster.
In 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.
>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.
Don't they still sell a database product? As long as they don't do the Venture Capital thing and sell off the most promising business units there should still be something for the company to do after the AI bubble implodes. Certainly there will be a lot of layoffs, and maybe even a chapter 13, but I don't think they'll stop existing.
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.
So 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
How 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
I 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.
I 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.
That is exactly what booing is, but citizens are allowed to boo. I can boo you, you can boo me. If you are booing me then I can walk away, and likewise you can walk away from me. If I'm booing you during a public performance that is indeed rude but then I need to be thrown out by security, which is perfectly allowed and expected.
Citizens, i.e each other, are not the problem when it comes to free speech, ever. The only entity which needs to be defended against is the entity that has a monopoly on violence, which is of course the government.
This 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/baa236e2a4d94d45fe93...
Itanium sales projections vibes
Feels a bit like Elons 1tn deal
FT 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.
FT 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.
And 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.
Yea 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
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.
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.
> 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.
> 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.
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.
> 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.
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.
What happens if you've got $300B worth of shovels but can only realistically rent them out for $5B/yr?
Nortel was a shovel maker selling shovels to ISPs.
Nortel was a bit different - I think the Chinese hack really killed them. Investors got the jitters then jumped ship or something?
But the inadequate sale value of shovels holds.
Their customer base rapidly disappeared and they tried to paper over the losses with accounting fraud where they had fake sales of equipment because their actual customers disappeared. They had tons of equipment to sell with few customers left to buy them.
Problem is, those Nvidia servers are useless to anyone who needs servers already racked in a datacenter. They're purposely made purely to run LLMs, and anything else would be a waste of time.
Nvidia is also fucking over anyone who buy these: datacenters depend on used hardware sales to recoup cost, sometimes getting up to half of what they originally paid for the hardware.... this hardware has no resale value.
It's literally garbage the moment it leaves the factory.
> datacenters depend on used hardware sales to recoup cost
Who? Ive worked for few big infra companies with millions to billions of DC assets. After depreciation and then some, say 3-5 years, theyre effectively scrap. Its more cost effective to buy new, denser, racks than continue to MRC on the stranded space and power. The reseller is cheaper/easier effectively paid to scrap the parts as e-waste and recover what they can.
2026 is the year of Google Stadia /s
> there will always be someone willing to pay them for GPU compute capacity.
There is an hourglass shape to emerging technologies. Everyone uses commodity hardware and duct tape to try to win the race to the bottleneck, where everyone save 2 companies goes bankrupt. As it narrows companies have learned enough about the problem to start developing purpose built solutions. Once you pass the bottleneck enough of your engineers go to other companies that the custom solution becomes mainstream and competition grows again.
Google was working on custom chips for AI before we knew it was AI. They are going to survive either as the dominant player in AI or as the underlying platform everyone else builds on.
That leaves one other spot for everyone else racing to the eye of the needle. Anyone betting on Oracle to win on technology is silly, betting on Oracle with a bunch of generic GPUs that anyone can get is down right dumb.
So given depreciation and interest they are negative
I mean that doesn’t have a $0 cost.
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.
they also have to find and sign large-scale and long-term power supply deals
https://archive.is/Qdf2n
The plan is to charge per core...tensor core
The 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.
The 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.
Why do people say “non-zero probability” instead of “chance” or “possibility”?
I say it when I really don’t have an opinion about the likelihood and don’t want to choose a word that infers high/low.
Do you mean the bg2 pod interview?
Is 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?
It’s looking like Google may outdo OpenAI.
ChatGPT has brand recognition and adoption, but not the best product anymore.
Google also has $100 billion in profit each year from it's core business to wait out OpenAI.
Google is also conflicted though.
The more they emulate ChatGPT's clean UI, the more they are failing to push ads in people's faces, which is what generates that $100B for them.
Their business model fails if their users don't experience a confusing crap-fest of ads.
> Their business model fails if their users don't experience a confusing crap-fest of ads.
I bet you OpenAI will implement ads far sooner than Google can hypothetically run out of money.
They don't have to do that today, though. Remember original Google? Or original Gmail? Neither had prominent ads for the first few years, a couple decades later the ads are everywhere.
> the more they are failing to push ads in people's faces
Won't be long until chat AI will include sponsored products and services in the output.
OpenAI isn't burning through tens of billions of dollars every year on its free tier for charity. It will dial up the advertising knob (and every other knob) to 11 the moment the cash starts to runs out.
If ads are the future of revenue for AI then every AI company is in trouble, because ads won’t even come close to covering the costs.
Google also has GCP where it can monetize its hardware investments.
As always, they will keep it clean until they can crank that enshitification dial to 11.
And they also have their own chips (TPUs), no need for Nvidia
And the search engine and crawler actually powering these LLMs
How is that not a conflict of interest by the way, when Google's AI search results prevent the websites it trained on from getting clicks?
How is it different than Google Summaries or AMP or any of the other ways Google tried to keep people from actually visiting the websites that drive all of their traffic.
Am I the only one that clicks through to the sources cited?
I usually do the same, but not always. And I believe clicking through is a behavior of a minority of people and interactions, judging by the click through rate drops sites have seen recently. (On mobile at the moment, so apologies for not grabbing a source for the rate drops sites.)
In the grand scheme of things? Yes.
> 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.
But 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.
> Companies with worse products win all the time based on brand and adoption.
Like google.
What is the cost of delivering regular search results vs. answering an AI chat question? How do you sell ads through each of these channels?
If you consider those angles you'll see that Google does not want AI chat to replace Google search any time soon. Google is being dragged into this kicking and screaming. They are damned if they do, and damned if they don't.
It’s interesting, it’s almost like if Kodak did end up making best in class digital cameras
No, it is harder. Google doesn't just have to make the best AI chat, they also have to figure out how to make profit from it. That's something no one has figured out yet. Open AI can make a loss every year, but if Google makes a loss the stock is going to tank.
Unless I’m missing something, Google doesn’t really have the “chat journal” aspect that ChatGPT has. It’s just a search engine.
For me personally this is a major feature.
https://gemini.google.com/
No folders or way to organize the history. It’s just a log of questions.
ChatGPT is much more designed around organizing your projects and folders.
What's a chat journal besides a history, which Gemini has?
There isn’t really a folder or project structure, as far as I can tell. (Just trying the app now.)
I imagine the majority of Gemini users are still via Google search, whereas ChatGPT usage is through the app.
NotebookLM?
You can get a $20 OpenAI subscription for some serious usage.
Google has no such thing for Gemini, it's subscriptions are brain-dead, expensive bundled with 2 TB of storage and other shit that I don't want.
Isn’t Gemini the same price for the same usage as OpenAI? I agree they bundle extra things in there, but you don’t have to use them. If you just used Gemini for $20 you’d be equally situated as OpenAI for $20 on the model front.
If you remove AGI dream from the equation, AI revenues couldn't come close everpresent ads on the internet which Google has monopoly over, and LLM directly affects Google core business.
Also Google doesn't have great business reputation for sticking to their APIs, so they need to be lot better than open model always, which it is now but my guess would be it wouldn't be for long.
so, these companies are playing hot potato and this is oracle holding it.
I 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.
Exactly, 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.
It would be an Adam Neumann moment. There’s no way OAI can IPO with its current financials.
Isn'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?
AFAIC, the correct take on the situation is thus:
https://files.catbox.moe/ufn8qa.png
And if even these guys can see it, we're screwed.
In 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.
Oracle doesn't own the GPUs themselves and may hold as little as 10% of the Stargate bag.
Please let it be true.
I 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?
As 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.
So you shorted Oracle and made money?
Knowing a stock is overpriced and knowing when it will correct precisely enough to profit are very different.
Sure 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?
the market will be irrational longer than you are solvent;)
And 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.
This is such a poor excuse for not being confident enough in your beliefs to put your own skin in the game. It's revealed preference vs. stated preference.
But in all likelihood, the people saying "I told you so!" never actually knew what they claimed to know.
If you want to know what someone actually believes, don't look at their comments, look at their positions.
Time to short major stocks?
Time to put your RRSP / 401k in cash, it's all starting to seriously teeter.
Well, bonds should be OK. CDs, Treasuries, etc
Bad 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.
This 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.
CDs (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.
Maybe, 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.
> Larry Ellison's kid runs TikTok
Also Paramount, which owns CBS News among other things. And they are looking to acquire the parent company of CNN.
“Conservative” meaning pro-Israel.
You're 2 weeks late.
LOL the drop from 2 weeks ago is about 4%.
-20% in the last month
Didn't they pop like 30% at last earnings?
Anyways, one stock in 1 month is irrelevant, look at SPY...
Let it ride
Diamond hands
Whoda thought that agreeing to build $300 billion of infrastructure for a company with $20 billion revenue and zero profit was a bad idea?
Sam Altman-Fried
Scam Bankrun Fraud?
One 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'.
Traditionally 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.
Alphabet at least returns capital via huge buybacks that effectively act as dividends, but with more tax efficiency.
Why would it be in fashion? If you want the money, then sell your shares and don't cause a taxable event for everyone else.
Couldn’t happen to a nicer bunch of crooks
I am Joe's complete lack of surprise.
There 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?
Tiktok, Zoom and Uber use Oracle Cloud.
Google is going to nuke OpenAI from orbit within the year, so hard to imagine these datacenters will be finished when OpenAI implodes.
Since QE and Zirp and then Covid stimulus money stopped making sense. It is fucking too much money in a few hands.
Oracle 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.
Finally, been waiting for this moment since I've learned about Oracle. Would be well-deserved for them. Hope Larry Ellison loses his yacht.
But there would be other consequences too, just consider the philanthropic organizations that Larry Ellison supports! Like the Ellison Medical Foundation, a non profit whose sole purpose is to keep Larry Ellison alive as long as possible!
> to keep Larry Ellison alive
This is called “begging the question”. I need some evidence that Ellison is not an undead.
An undead lawn mower.
That dude literally launched medical foundation for his personal healthcare.
Larry Ellison owns 40% of Oracle ($625B market cap) as of today. So even if Oracle tanks and becomes a $60B company (10% of what is worth today), Larry will still be a billionaire worth $25B. He will keep his private islands and yachts.
These people are in the class that never fails. Ellison won't lose anything.
I'm sure they said the same about Citizen Louis Capet.
One can dream.
[flagged]
Please stop. This kind of rage-posting is not what HN is for. It's fine to think whatever you want about Mr Ellison or any other tech luminaries, and criticize them for whatever you like. But commenting in this style does nothing to harm Ellison, whilst making HN a dismal place for your fellow community members who do actually read what you post.
For me it was a joke. But it wouldn't be the first time something like that happens. I will take your advice with good will. thanks.
So you’re saying there’s an upside?
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.
Sam Altman has been playing 6-D chess this entire time, and we thought he was just a fraudster.
In 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.
>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.
>fraudster excuse me sweaty, AGI is actually around the corner
Don't they still sell a database product? As long as they don't do the Venture Capital thing and sell off the most promising business units there should still be something for the company to do after the AI bubble implodes. Certainly there will be a lot of layoffs, and maybe even a chapter 13, but I don't think they'll stop existing.
To a first approximation, no new company says “after looking at all of the alternatives, I think we should choose Oracle!”
Also when was the last time you heard companies migrating to Oracle from any DB?
Oracle Database Enterprise Edition retails at $47,500 per CPU core (there is a 2-for-1 discount on x86) when licensed this way.
There is extreme caution in deploying new Oracle databases, more so than SQL Sever.
Oh god, that'd be finally some good news in this recent brutal and sad time period.
unfortunately their database continues to print money from trapped customers
the "AI" is just an attempt to pump the stock price
OpenAI though can't survive as there's no business at all to fall back on
How is this even rational that companies "invest" billions of dollars that they dont even have? capitalism ad2025 is a joke
> 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.
If you can borrow money at X% and make (X+1)% on that money, you do that and invest it. As an individual you can do that by buying stocks on margin.
You can also do it by buying risky stocks and pretending you're buying alpha!
Wait until you discover that the bank doesn't have those dollars in your account.
It mostly does. Treasuries are a kind of dollar.
They could cash out everyone's account from the Scrooge McDuck pile of gold in the vault?
Up to $250k per account yes. The bank would fail but you'd get it over the weekend.
So 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
How 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
I 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.
He says a lot of things. Just because some of them end up being true by happenstance doesn't make him a prophet.
As he should be booed off the stages in any respectable society. Regardless of whether he is right or wrong about ai.
> 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.
booing is also covered by free speech.
I 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.
That is exactly what booing is, but citizens are allowed to boo. I can boo you, you can boo me. If you are booing me then I can walk away, and likewise you can walk away from me. If I'm booing you during a public performance that is indeed rude but then I need to be thrown out by security, which is perfectly allowed and expected.
Citizens, i.e each other, are not the problem when it comes to free speech, ever. The only entity which needs to be defended against is the entity that has a monopoly on violence, which is of course the government.
> but I'd consider it more of a coward form of violence.
Booing being a form of violence is the hottest take i’ve seen this week.
Musk 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...
Elon Musk is suing OpenAI over the for-profit conversion so that clouds his judgement.