Big Red borrows a lot of green, hopes AI will put it in the black The weather's cooling, and so is Wall Street's patience with Oracle's AI makeover. Big Red is spending big, and the risk metrics aren't looking cozy. It all started so well in September. Despite lackluster profit and revenue figures, Oracle’s shares climbed 30 percent when its first quarter results for FY2026 revealed its …
IF they do then the stockholders should blame its dear leader for taking too much out of the company.
If they can't fund their tow dipping into AI from the giant profits that they are raking in then perhaps the company should be left to fail (miserably)
There are two main risks associated with a bubble that has many of the hallmarks of the railway bubbles of the 19th century, where money was borrowed from all over to build new infrastructure from which profits would be enough to more than cover the loans plus interest. The first risk is that you never make the money back – that's okay, you issued equity, right? The other, and more important for loans or bonds, is that the inherent mismatch the lifetimes of the money you borrowed and the money you spent (counts financially as a loan) can severely impair your ability to pay back, not just those bonds but anything else. And as the risk is perceived to grow: RoI isn't as great or as fast as you expected; the costs of the infrastructure are higher than you thought (very likely, especially power) and it's taking longer; the competition is faster or cheaper.
If it looks like a bubble and blows up like a bubble, it probably is a bubble.™
Something else they have to consider is that the amortisation of GPUs and tied hardware is becoming a big and rising dent in the P&L of the AI enthusiasts. With the cost of the AI hardware and a likely 4 year amortisation that's going to mount up. Oracle's depreciation and amortisation is currently around $7bn a year. If half of OpenAI's $300bn is the GPUs, networking, RAM, and installation, that's an extra $37.5bn of amortisation each year that Oracle will take a hit on. At the moment Oracle's EBIT is $18bn, so if they have to accommodate another $35bn of costs then the term Big Red will be curiously apposite for its financials.
Obviously all those people who worship EBITDA* or believe non-GAAP** financial statements won't notice because they think capex, equity and debt are all free, but still, $300bn for a statistical word jumbler seems a touch optimistic to me.
* EBITDA: Earnings before all the nasty, heavy costs you'd rather ignore.
** nonGAAP: Financial statements that we've massaged in non-standard ways purely to persuade our investors we're doing better than we are.
Good point, I'd forgotten about that: the physical assets of the data centres and especially the power stations will probably retain some value even if the deadlines slip but the chips will become essentially worthless. And, as you suggest, the impairment could be substantial.
You will not solve all the big problems in society just by having it.
And if you build a datacentre, you will have to upgrade the chips (and probably the boards they are on, power and the rest) in, what, 3 years. If you don't, your punters will shift to a shiny newer one. So all this kit you are 'investing' in, you are actually subscribing to. That's why that bloke from Nvidia keeps smiling. On what planet is a subscription an investment?
As mentioned above, AI has all the hallmarks of railway mania and all the other bubbles that we look back on with amusement and mild contempt.
If you repeat past financial idiocy, don't expect the outcome to be different this time round.
True, but also false.
If your payment is coming from someone's credit line, what happens when that is withdrawn?
Moodys do seem to be rather concerned about that.
As the bubble gets close to bursting, it becomes necessary to ensure you get paid up-front - or you'll not get paid at all. And of course, that is also the thing that bursts the bubble.
"the fall can be ablaze with orange, yellow and — yes — red, in time, the colors all eventually turn to brown."
The North American version of Autumn might well be rather apt.
The shiny green foliage becomes yellow, red… brown—then blown away leaving the naked skeleton of the tree denuded of leaves.
Dismal prospect if, as in Narnia, the Spring never comes.
Although some of America's "Great and Good" could give Jadis a run for her money in the malevolent narcissism stakes.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2025
