OpenAI's Sam Altman 'makes' Oracle do what it has never done in its history, 'BURN' $10 billion and borrow for ...

Oracle's stock experienced a significant drop after reporting quarterly results that missed revenue expectations, largely due to substantial spending on data centers for AI customers like OpenAI. The company's heavy reliance on a massive OpenAI deal and its debt-fueled expansion have raised investor concerns about its financial stability and future growth prospects.
Just months after Oracle stock hit historic high, stunning Wall Street, after it inked a $300 billion deal with ChatGPT-maker OpenAI, the company seems to be feeling AI jitters. A smaller player in the cloud market for a long time, Oracle this September staked claim as one of the bigger providers of the rented computing power crucial for generative AI after its tie-up with ChatGPT-creator OpenAI. The same month Oracle raised $18 billion in a jumbo bond sale the same month, one of the largest debt issuances on record in the tech industry. Now, just months later, on December 10, the software giant posted quarterly results that fell short of Wall Street's revenue expectations pulling the stock more than 11% in after-hours trading. The not-so-happy results come after Oracle’s historic stock surge in September that valued the company at $500 billion and made its founder Larry Ellison world's richest man (though only for a day). Oracle shares fell more than 11% in after-hours trading after the company said that it burned roughly $10 billion in the November quarter due to spending on data centers for artificial intelligence customers such as OpenAI. According to a report in The Information, cash burn is unprecedented in Oracle’s history and has prompted the company to borrow heavily for such projects, including an $18 billion bond offering in September. Oracle's five-year credit default swaps, which offer bondholders a hedge against default, have shot to record highs as it borrows heavily for the datacenter buildout. This AI-fueled debt load has Oracle investors on edge.
Why the Big Problem is OpenAI
Months after Oracle's $300 billion-plus contract backlog ignited a stock-market frenzy, the enthusiasm has given way to doubts about the company's over-reliance on OpenAI and debt-fueled datacenter buildout. Analysts have expressed concerns that a big portion of Oracle's capital expenditure is tied to OpenAI-related data centers. This has sparked investor worries especially as details are scarce on how OpenAI plans to fund its spending, which total more than $1 trillion by 2030. Oracle's stock has eroded all the gains from the stunning 36% jump on September 10 after it announced the $300 billion deals backlog with OpenAI at its last earnings call, even as shares remain higher by nearly a third for the year. November was the worst month for the company, with stock plunging more than 20%. December has been slightly better, but still way below from its record high. ' In a note to investors, as reported by Reuters, Bernstein analyst Mark Moerdler said that the $300 billion OpenAI data-center contract gives Oracle "unprecedented single customer revenue exposure". Gil Luria, analyst at D.A. Davidson said, "If OpenAI fails and the contract goes away, Oracle would need to scale back the build out, write off some contracts and start working down the debt, but it would not default. Similarly, if "OpenAI achieves super-intelligence, spends $1.4 trillion, none of us have to ever work again, and Oracle is fine", he added. On its part, to allay some of the investor concerns, Oracle said in October that it expects cloud infrastructure revenue to grow to $166 billion in fiscal 2030 and that fresh bookings were coming in from a range of customers, not just OpenAI. The company also touted a $20 billion new deal with Meta Platforms.
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