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It’s too soon to be talking about the Curse of OpenAI, but we’re going to anyway.
Since September 10, when Oracle announced a $300bn deal with the chatbot maker, its stock has shed $315bn* in market value:
OK, yes, it’s a gross simplification to just look at market cap. But equivalents to Oracle shares are little changed over the same period (Nasdaq Composite, Microsoft, Dow Jones US Software Index), so the $60bn loss figure is not entirely wrong. Oracle’s “astonishing quarter” really has cost it nearly as much as one General Motors, or two Kraft Heinz.
Investor unease stems from Big Red betting a debt-financed data farm on OpenAI, as MainFT reported last week. We’ve nothing much to add to that report other than the below charts showing how much Oracle has, in effect, become OpenAI’s US public market proxy:
The theory goes that OpenAI is in a rush to define discover AGI, and Oracle is uniquely able to scale the compute capacity it needs. Oracle promises the lowest upfront costs and fastest path to income generation among the hyperscalers because it’s a data centre tenant rather than the landlord.
Alternatively, Oracle doesn’t have as much operating profit to burn as its competitors, so is throwing everything it can at supporting its one big customer in exchange for an IOU:
At an analyst day last month in Las Vegas, Oracle said it was aiming for cloud computing revenue of $166bn by 2030:
© Oracle company presentation
To get there, Oracle’s capex budget for the current financial year ending May is $35bn. The consensus has annual capex levelling out at around $80bn a year in 2029, after which revenues continue to ramp:
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