Global Expansion: OpenAI + Oracle

0:00OpenAI has said that they are building five new Stargate data centers with Oracle and Softbank. This is massive from a company that is already doing so much with the Stargate project. Just on Tuesday, they announced this. They're going to build all of these. They're going to be in the United States. And I know that they've mentioned they're going to do other Stargate projects, other places. These five are just still in the United States. The new data centers are going to have a planned capacity of about seven gigawatts. This is absolutely massive. That's enough energy to power more than five million homes.

0:34So today on the podcast, we're going to be breaking down everything that's going into this project, where they're getting the money from, the impact this has had on Oracle, how NVIDIA is helping to fund this, and a lot more. But before we get into that, I wanted to mention, if you want to build AI tools without knowing how to code, I'd love for you to check out my startup, AIbox.ai. We've just launched a beta of our builder, which is a platform where you can describe a tool you want to build, whether that's a newsletter generator, whether that's some sort of tool that you use internally in your organization, you know how you use AI to automate your processes.

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1:43So the new sites for the current project, or the five new that just got announced, are going to all be in interesting places. So there's Shackleford, Texas, Dona Ana, New Mexico, There's one in the Midwest and there's two others that are being built with SoftBank in Ohio and Milam County, Texas. So we're seeing a lot of like New Mexico, Texas, Ohio, and some of the Midwest kind of all over the place. Not a lot on the East or West Coast specifically, which is interesting. And these new projects are part of this massive infrastructure build out that they're doing. And what's interesting is all of this is coming as a lot of people are asking, like, how are they going to spend all of this money?

2:23How are they going to raise all the money to fund this, right? Like OpenAI essentially is becoming a data center creator, which is really interesting. And a lot of this comes back to NVIDIA. So NVIDIA said that they are planning to invest$100 billion into OpenAI specifically. Just on Monday, they announced this. And this is all part of the deal for this data center build out. So basically, it's interesting because up until this point, we've seen that NVIDIA, they invest money into all the big AI startups, 11 Labs, Anthropik. They put money into all the big ones because they know they're going to have to buy their GPUs.

2:55And this is interesting because it's moving just from, okay, you need our GPUs to train your models to, like, we know you need to buy our GPUs to fill up an entire data center or multiple data centers. So it seems like NVIDIA's investment here just is the gift that keeps on giving, even if these data centers aren't exclusively used for OpenAI, which I think they would be. But, like, they're creating an asset, a data center asset, that is going to be filled with NVIDIA GPUs. So this is a no-brainer for NVIDIA to invest in. Now, the controversy that a lot of people have talked about is the stock implications of a lot of these deals.

3:27Because we have Oracle making a lot of these new deals. Oracle also just announced that they were signing a$300 billion deal with OpenAI, where OpenAI was going to pay them$300 billion for compute. And this, of course, was controversial because it wasn't like OpenAI wired them$300 billion. They don't have that much money. They gave them a letter of intent that in the next like three years or four years, I think, that they're going to want to do this deal. So what's interesting to me is that we kind of have this moment where it feels like NVIDIA is giving money to OpenAI to build data centers. OpenAI is giving money to Oracle to also build them data centers.

4:09And Oracle is giving money back to NVIDIA and OpenAI as investments. like all of these different companies are, it's like a giant circle of everyone is giving each other money or letters of intent, right? So not even money, but like, Hey, I'm putting this down that I want to buy it. And when this is happening, the stock prices of these companies are going crazy. If you look at Oracle stock price over the last six months, it's up 90%, over 90 % in the last six months. And I mean, in NVIDIA, who's kind of been this like incredible company to watch over the last six months, they're up 48%, which of course that's amazing as well.

4:44But like even more than Nvidia, we're seeing Oracle stock absolutely rip, like going up 90 % in six months is crazy. Coming from$150 to$293, basically the whole stock has doubled in six months. And by the way, this wasn't a small company before, like Oracle is a massive corporation. They've been around for a very long time. And so it's like basically these deals, these$300 billion LOI deals are boosting Oracle stock up a ton. And then Oracle is able to use this inflated stock price, or I don't know if you call it inflated, but this greatly increased stock price to go and invest more money into their GPUs or invest it into these other companies, which is interesting.

5:26So Oracle, because of this, has had a bunch of shakeups. They just announced that two of their presidents are going to, basically their CEO is moving into a new role and they have got two new presidents to co-CEO the company. Obviously this thing is growing into an entire beast of its own. I mean, their stock doubled in the last six months alone. So Majuric joined Oracle in 2014 from AWS and he was a founding member of Oracle's cloud engineering team. So he's going to be one of the new co-CEOs. And then we also have Mike Silke, who's also going to be a co-CEO. And Silke has served as the president of Oracle's industries division since June.

6:08He had a bunch of other different roles with the company. And he actually came to Oracle through an acquisition of Primavera Systems back in 2018. So Safra Katz, who is currently the CEO and has been since 2014, is going to move into a role as the executive vice chair of Oracle's board of directors. So we're seeing this trend where the company is just exploding. And some people say it's dubious, these$300 billion LOIs, but the company is exploding. Their stock price has doubled. They're moving the CEO out to new position and putting new CEOs in. It feels like new breath is being breathed into Oracle in an insane new way where they're basically catching up with what was only, you know, NVIDIA was basically the only company that people had said was going to win as selling, you know, picks and shovels in the AI gold rush.

6:56And it seems like now we're bringing them other players that are growing rapidly, Oracle, AMD, and a bunch of other players. So with that, Oracle is now going to be raising$15 billion in corporate bond sales, which is interesting. And also like$15 billion in corporate bond sales today versus six months ago is massive. They're literally, their stock price doubled. So they're able to get a way better valuation on this. They've been known as a cloud infrastructure giant for a very long time, and they're going to be doing this through corporate bond sales. That's according to reports out of Bloomberg.

7:30and this could actually happen this year. This is the second biggest bond sale this year that Oracle will be doing. And this could include up to seven different parts with potential for one of those to be uncommon 40-year bonds. That's according to Bloomberg. So all of this is right after OpenAI signed that massive$300 billion LOI. When they got that right, so OpenAI is like, all right, here's a$300 billion LOI. Everyone was asking like, where are they going to get the money to build the compute? Because that's just an LOI. They have to go and build the compute. But using that LOI, they can now raise these corporate bonds.

8:08Their stock price is up. Like they have a lot of all of a sudden everything exploded. So now they have the tools because publicly there's this$300 billion LOI. They now have all the tools they need to go and raise the money and actually build this, which is interesting. And also apparently they're in talks with Meta for about$20 billion. dollars worth of compute as well, which a lot of people are like, oh, it's only 20 billion dollars. Like, that's nothing. You know, OpenAI just did a 300, like 20 billion dollars of compute. This is a massive deal. This should have really been quite positive for the stock.

8:40But with everything else going on being so much crazier, it is, you know, it didn't seem to get grabbed as many headlines as other things. So it seems like everything in data center land is going absolutely crazy. And I just want to bring you back to the, the, something I said at the very beginning of this episode, which is that these new data centers are going to be seven gigawatts. So that is enough energy to power more than 5 million homes. Like these data centers are going to, um, are going to be insane. This is going to be massive. A lot of energy consumption, a lot of people in America, I will say are complaining that the cost of energy is going up dramatically because of data centers.

9:22Um, and so it's sort of another point of controversy where if you look at, uh, certain jurisdictions are giving these data centers tax breaks, um, or, or, or basically incentives to build their data centers. They're giving them cheaper electricity. They're tying them straight into the grid. I believe the current Trump administration has, I don't know if anything has happened here, but they've talked about, um, allowing the new data centers that are being built to also build power plants on site to offset that. because basically like, you know, if OpenAI goes and builds these five new ones that could use the same amount of energy as five million homes, pulling that from the grid could be pretty rough.

9:59And so we need more energy production. So I'm not sure what OpenAI's plan is for that. I sure hope that they're planning on building out their own energy production along with the data centers. So it'll definitely be something we'll have to look at. But yeah, hopefully this isn't something that just completely nukes the entire grid of America. I'm sure that will happen in some small part, but it's incredible just the scale and the price of a lot of these projects. So I'll definitely keep you up to date on all of that. And as always, make sure to go check out AIbox.ai to build your own tools with AI and to get access to the top 40 different AI models in one place for 20 bucks a month, including text, image, audio, and basically everything you need for using Generative AI at work and in your job.

10:47Thanks so much for tuning in and I'll catch you in the next episode.