Oracle is underwater on its $300B OpenAI deal
ft.com
ft.com
https://d9j0pm70mrv84f.archive.is/Qdf2n/baa236e2a4d94d45fe93...
We should be so lucky as to compare 2025 to 1997, when Itanium and its projections were announced.
OpenAI's side of those deals are just announcements, which may become real. Or not.
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.
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.
Also buisnisses have invested to host things locally themselves as well.
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.
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.
Nortel was a shovel maker selling shovels to ISPs.
But the inadequate sale value of shovels holds.
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.
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.
Datacenters hire companies to do this on their behalf, as they don't have the internal know-how to do this. Even the big cloud companies do this.
They're on 3-5 year cycles, yet the hardware life has a good 8 years in it. The reseller sifts through what comes out, sees what is still alive, scraps what isn't, and resells the rest.
What you don't understand is this isn't a one way relationship. If you're a major cloud company, your hardware probably already is worthless. Meta (and other companies) use a non-standard case and rack "standard" called Open Compute (OCP)... there is no resale market for these, as normal datacenters use normal racks with normal cases. Meta has to pay a company to dispose of these and lose 100% of their investment.
But lets say we go to someone else that does use standard hardware, and the rest of the industry buys this stuff up (to maintain existing fleets that don't need upgraded yet, not everybody is on some ridiculous 3-5 year churn), the company you partnered with to deal with your e-waste is likely to either give you a much better rate or even pay you for your hardware (if it is in high demand).
These enterprise inference machines have zero resale value. Even the OCP stuff I mentioned above has a small market (theres a few smaller datacenters out there toying with OCP due to it having better density, but aren't willing to buy new to test it out), but there is no market for these inference SBCs.
See my sibling comment to this for more information on why the SBCs are uniquely weird.
Even with zero resale value thats “fine.” Anytime Ive owned capacity planning it’d be more cost effective to pay someone a multiple of rack MRC to get the hardware out and free up the space and whips. The impediment was almost always free hands and coordination functions that were being spent on new adds rather than replacement.
Also, a lot of the industry runs on incredibly poor margins. The only datacenter space in the world right now printing money is either owned by clouds or owned by the AI bubble (which are sometimes the same companies, or the cloud leasing space to the AI bubble).
Mostly, profits are eaten by power deals (this is why Facebook put their biggest important DCs up where the cheapest power in the US is) or property ownership (buying land, building the DC, paying property taxes, maintaining the building, etc, that shit aint cheap), and then you get to buy hardware and hopefully get customers.
Amazon, Google, Facebook, et al all cheat their way through every loophole known to man to keep the costs down and the profit high; not a lot of it is from scale, even though they're still trying to chase that to the end, too.
> It's literally garbage the moment it leaves the factory.
Sorry I'm new to this, can you explain how? Why would high-power GPU racks not have good resale value?
* Lowest short term costs favors "just use the Cloud" solutions, that will often have power, HVAC and space constraints that favors new GPUs.
* Lowest long term costs bias the cost analysis to OPEX, where old GPUs gets expensive very fast, as they use more power, HVAC and space for less compute.
Each GPU chip is approximately twice the size of the biggest desktop version, and it has two of them, and it roughly twice as dense as anything else you could do using normal enterprise-dense GPU deployments (ie, those rigs that have 4 x16 slots and fit dual-slot GPUs across 8 slots)
However, these are not the same chips, they are siblings: the major change is, depending on the generation, they contain 2x or 4x matrix math ALUs and no texture units.
Seeing as it is a "small" (for enterprise) CPU, and a GPU that is very poor at non-matrix GPU tasks; and since it doesn't have TUs or media controllers (thats the thing that does DP/HDMI and video decoding/encoding) it can't be some weird niche desktop.
Unless you're doing inference at home, this thing is useless. Inference at home, and even small scale enterprise inference, is very very niche. There isn't enough market to give these boards a second chance.
However, totally normal used server parts? Totally useful. Cases, fans, power supplies, motherboards, CPUs, RAM, HBA/RAID, NICs? All useful to end users, either smaller companies doing inexpensive onsite, smaller datacenters maintaining an existing fleet and not needing to upgrade yet, or people building home labs.
There's about to be a huge glut of GPU capacity and we still haven't figured out anything to actually do with all those GPUs that creates value at the scale of society.
Everything they do now steals value. Takes it from artists and bloggers and puts their money in the hands of CEOs and investors. Super efficient idea theft isn't creating new value for society because the value gained is always offset by the destruction of value we already had...
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.
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.
Like google.
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.
I bet you OpenAI will implement ads far sooner than Google can hypothetically run out of money.
Won't be long until chat AI will include sponsored products and services in the output.
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.
For me personally this is a major feature.
I imagine the majority of Gemini users are still via Google search, whereas ChatGPT usage is through the app.
ChatGPT is much more designed around organizing your projects and folders.
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.
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.
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?
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?
https://files.catbox.moe/ufn8qa.png
And if even these guys can see it, we're screwed.
There are eligibility requirements to meet before a stock can even be considered for inclusion into the SP500, and it’s hard to see how OpenAI, if they ever get into the situation where they need a public bag holder, could pull off another restructuring and then seasoning before the whole world realizes what’s going on.
Be wary. Pay attention. But don’t lose any sleep over it.
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.
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.
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?
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.
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?
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.
you could say for half of all threads here, don't talk about it, it's all just doomshilling, just shut up and make a bet on polymarket and make some quick buck instead. but to me it sounds like it's censoring people. these talks is why a forum exists.
sure I also agree that some comments like "ah stock is overpriced" doesn't give much useful info. feels like a low effort manipulation somebody would say publicly if he was a trading firm and wanted to get stock lower to buy some. but I would say "why?" not "shut up and go gamble on it".
"It often happens that someone propounds his views with such positive and uncompromising assurance that he seems to have entirely set aside all thought of possible error. A bet disconcerts him. Sometimes it turns out that he has a conviction which can be estimated at a value of one ducat, but not of ten. For he is very willing to venture one ducat, but when it is a question of ten he becomes aware, as he had not previously been, that it may very well be that he is in error. If, in a given case, we represent ourselves as staking the happiness of our whole life, the triumphant tone of our judgment is greatly abated; we become extremely diffident, and discover for the first time that our belief does not reach so far. Thus pragmatic belief always exists in some specific degree, which, according to differences in the interests at stake, may be large or may be small." -- Immanuel Kant
Perhaps having our opinions moderated by our appetites to bet behind them would help offer a better picture of the world to us than just holding ideas and airing it out to the commons. If you don't want to do that, maybe don't rush to judgement. There's lots of things in the world that I don't understand and I don't have opinions on; I trust that the experts in those fields have informed opinions.
> you could say for half of all threads here, don't talk about it, it's all just doomshilling, just shut up and make a bet on polymarket and make some quick buck instead. but to me it sounds like it's censoring people. these talks is why a forum exists.
I don't think a forum should exist for banal thoughts. Online forums shouldn't be places for people to just say whatever they think. The defining problem on the internet is Low SNR; the amount of irrelevant content far exceeds the amount of relevant content. Search engines and LLMs are huge industries all oriented around surfacing relevant content. I don't think contributing to the net's low SNR to speak "your truth" is a good thing. The end result of that is an internet filled with banal, irrelevant, often incorrect information.
> not "shut up and go gamble on it".
I'd say "if you have nothing new to add, shut up and maybe go gamble on it to test your feelings"
Betting money on some stock makes you an expert in some subject? Cmon
This is hacker news, many here are literally experts on this thing, and not experts in finance, and not into gambling.
> I don't think contributing to the net's low SNR to speak "your truth" is a good thing
And you are saying people should only be allowed to say whatever they decide to put money on knowing full well that if enough rich people prop stock up for long enough short attempt will fail even if the company is bullshit hype. This just creates a rich people echo chamber that's all.
No I'm saying that if you don't have anything new or informative to say, don't say it. I don't really talk about why AI is a bubble because I have nothing new to add that hasn't already been said even though I believe it too. Things I am informed about and are different from what others have already said, I say. Obviously the line here is quite vague but I think we should err on the side of saying less not more.
> This is hacker news, many here are literally experts on this thing, and not experts in finance, and not into gambling.
In my own area of expertise, < 10% of HN commenters (depending on the thread) actually understand what's going on. The rest really don't. I think you see expertise on this site where I do not. It's true a few experts in my field are on here but there are many more in other places like project Discords or Twitter or even mailing lists.
Anyway I don't think there's much more to be gained by us talking. I think we have two fundamentally different views on what this site should be. Thanks.
I don't see anyone else saying that here yet though? Every day new people learn about that quote, its a good quote that helps many not lose money, its not bad to post it where its relevant.
If you goad people to lose their money then they can defend with that quote, that is fine.
My original thought was:
> 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.
I'm not sure what folks are thinking about money when they read what I say. I think there's some imputed values about gambling and money there (namely I read some values about gambling being bad and money being dangerous) that might be confusing from my point.
Money is just the tool to hold one accountable for what they say. Saying something like "oh it's obvious Oracle is in trouble, AI is a bubble it's going down" (not actually what GP said) is, to me, a post of sentiment without information. It's the kind of thing I do in group chats not online forums. I think it's important for folks who post a sentiment to either post why they believe that sentiment with some amount of detail or to have some consequence for failure for their sentiment. Or else the commons are polluted with irrelevant at best and incorrect at worst content.
Put another way, I think the open internet needs a much, much, much higher level of gatekeeping than it gets now. Putting money behind your beliefs is one way to do this. And since we're talking about publicly tradable financial instruments, it seems like a fairly obvious one.
Some people have a lot of it and who has more can gang up and influence markets meaning anyone who tries to prove a point to you by shorting a legitimately overpriced stock will be holding a bag
So that's why forums exist and it is good to be able to say what you think and not get bullied into shutting up
if you want economic information then why are you in this forum, just go to the market and let people discuss things;) if you participate in that discussion then that's your choice
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.
Anyways, one stock in 1 month is irrelevant, look at SPY...
Also Paramount, which owns CBS News among other things. And they are looking to acquire the parent company of CNN.
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'.
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.
Sam Altman has been playing 6-D chess this entire time, and we thought he was just a fraudster.
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.
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.
What makes it hard to understand is that the Oracle going bankrupt on their debit because OpenAI took all their money is what would destroy the money. AFAIK, OpenAI itself doesn't have a lot of debit to burn. It would burn money that is currently on the hands of Oracle's creditors.
And bankruptcy is a bit of an extreme example, but just people thinking Oracle is less credit-worthy would destroy some money already. Repeat that for every company that invested in OpenAI.
This is called “begging the question”. I need some evidence that Ellison is not an undead.
There is extreme caution in deploying new Oracle databases, more so than SQL Sever.
Also when was the last time you heard companies migrating to Oracle from any DB?
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
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.
Afterwards they can use that, charge the other member banks or reopen: https://www.federalreserve.gov/financial-stability/bank-term...
I happen to agree with him re OpenAI...
This is _actually_ what a respectable society does.
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.
Booing being a form of violence is the hottest take i’ve seen this week.
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.
If you think that the act of booing is a form of violence, then what do you think about _actual_ hate speech?
Using free speech to boo him when he is getting celebrated is defending free speech.
Again, I might have misunderstood what booing means though (which explains the downvotes at least...)