Monologue: Is Oracle Screwed?

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Guaranteed Human Left it late for Mother's Day Don't worry, MoonPig's got ya Because there's Mother's Day cards And then there's MoonPig Mother's Day cards Aww You can add stickers, her favourite photos Even a message in your very own handwriting Get it there with next day delivery So there's no path, no panic And you'll still be the favourite Plus get 20% off when you use code Mum20 Because this Mother's Day Everyone deserves her MoonPig.com Calls her media Greetings and salutations, Traveler I'm your host Ed Zirtron And this is your Better Offline monologue for the week Blood is running through the stock market As everybody realises at once The most expensive shit I've been saying since 2024 The Generative AI costs too much Looses everybody money And doesn't have the growth potential to make any of this shit worth it Yet this has been a week for the more sophisticated haters With Oracle Stock plummeting on the news that it had to raise another 45 to 55 billion dollars To fund data centers for OpenAI Which timed poorly with the story running That Nvidia was no longer doing its 100 billion dollar investment in OpenAI Something you will know was the case Because it was on this podcast months ago And has been multiple times since To catch you up Last September, Oracle announced the 300 billion dollar 5 year long deal To provide compute to OpenAI Powered by 4.5 gigawatts of compute capacity that At the time and at this time Did not and does not exist As far as I can tell Only 200 megawatts of Stargate Abilene A project that's been a work in progress since 2024 Appears to be complete And to my knowledge as well as only like 200 megawatts of power out there They need a lot more than that That's meant to be a 1.2 gigawatts center Not great Now several other data center projects are allegedly in the works too Stargate Shackle for Texas and Wisconsin Stargate New Mexico And theoretically at least Stargate Michigan Through Blue Al who invested in basically every Stargate project And pulled out of Michigan due to financing conditions souring Oracle had previously raised 56 billion dollars in bonds and debt With 30A billion of that specifically earmarked for Shackle Food and Wisconsin That debt is payable over 4 years with 2 one year extensions And payments are interest only until construction is complete One little problem I'm afraid According to Jerome Darling at TD Cohen It's upwards of 42 million dollars in megawatt to build a data center Completing these data centers is going to cost at least $189 billion for the 4.5 gigawatts and Oracle was and is short by quite some measure So it sold 25 billion dollars more in bonds and plans to sell another 20 billion dollars of stock In an at the money share sale Literally printing new shares and dumping them onto the market It intervals set by the bankers behind the deal Mathematicians in the audience have likely run the numbers at this point and worked out that this is only $101 billion which is less than $189 billion May seem obvious but I don't know The fucking market stone appeared to be able to count Now the other problem Oracle has is that the only way it can pay these loans off Is if open AI is able to pay them and I need to be clear how difficult that will be That $300 billion five year long compute deal Guarantees that at least one year will be over $80 billion in payments For some context the entire revenue of Microsoft's Your cloud in 2025 was $75 billion How does open AI pay that? Especially when Oracle hasn't built the capacity But they don't have the money They only allegedly made $13 billion last year and lost $9 billion on top of that How the hell do they pay this? I don't know but everyone seems to think they will or at least they did Now in video of course went out to say that they would absolutely be investing a lot of money in open AI Supposed up coming round this $100 billion one different to this $100 billion deal They were talking about open AI is currently raising $100 billion allegedly But in videos only putting $20 billion in and Jensen went on CNBC with Jim Kramer and had the most bizarre conversation I'll link to it in the episode notes He was just saying oh yes open AI is wonderful cutting over Jim Kramer As Jim Kramer just said they're going well you know we love your deal is to base The best deal ever sound like Sylvester the cat And Jensen is just cutting over him saying what open AI is amazing no drama no drama at all And let me tell you something the reason he's saying no drama is because open AI also leaked a thing saying that it that Sam Altman and open AI were unhappy with Nvidia chips It's also good this is this is the kind of stuff that happens when things are going well And well Oracle saw this and Oracle saw this back and forth and they thought we need to help we need to help the markets So they put out a tweet and I'm just going to read it to you The Nvidia open AI deal has zero impact on our financial relationship with open AI We remain highly confident in open AI's ability to raise funds and meet its commitments Sadly, Oracle's the Nvidia open AI deal has zero impact on our financial relationship T-shirt appears to have people asking them a lot of questions already answered by the shirt Jokes aside that's the kind of thing the Alex Wilhelm tech reporter said it's bank-run language You don't want it that will always have the opposite effect saying well it's I said this on an interview recently It's like walking into a room saying I'm fucking kill anyone People are good to probably going to ask why you need to bring that up at this time The other part of that statement that got me was we're highly confident in open AI's ability to raise funds They're not paying this out of cash flow so Oracle is just depending their entire existence on open AI's ability to raise and venture capitalist It's all very good. It's all very very good and it all times very very poorly with a TD Cohen analyst letter that suggested Oracle would have to fire upwards of 25,000 people and potentially sell its valuable It's it, Cerna healthcare IT infrastructure just to make it through and again they paid $28 billion for Cerna And TD Cohen said that would be 8 to 10 billion dollars worth of cash flow again nowhere near $189 billion Look, look, on eight people to realize Oracle cannot afford this build out It's committed to building 10 gigawatts of capacity for open AI meaning that on top of the $189 billion it needs already Oracle needs another $231 billion just to build those data centers And on its last earnings Oracle had a cash flow of negative $13 billion It's not looking very positive and yes, Oracle also just bought TikTok a business that also but it loses billions and billions of dollars And yes, Larry Ellison's wealth is almost entirely tied up in Oracle's stock which is currently hurtling towards hell with a velocity reserve for thatcher and Reagan I know you're gonna listen to this and I hear from a lot of you no matter how many times I say this Everyone's like, oh the TikTok deals not about it, it's not about making money, it's about political influence Wow, you're the first fucking person to tell me that, no one has ever told me that other than the first 150 fucking people Not an original thought and also not a particularly effective one The algorithm on TikTok is already shitting its pants because Oracle can't stop messing with it I don't want to do the propaganda thing and guess how TikTok makes money adds and how does TikTok show ads? Well, they keep you on the app with the algorithm How do you think this is gonna work? I know it all feels a little ridiculous but there really is a future in which Oracle collapses Larry Ellison's stock is entirely tied up in Oracle and I just did a story called the haters go to Oracle In my premium newsletter that goes through this but this is a company, a company, I'm just keeping it a company in decline And they are Really looking quite shaky and even if they weren't in decline the amount of money they're trying to spend here Is genuinely impossible for them to afford? They are going to have to stress the debt markets, the levels they've never seen and even then they cannot afford the payments unless open AI can pay them more than anyone has ever paid for cloud Ever Ah no, I'm excited, I'm a hold stock And until we know more, I really only have one question Is that good? 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