Monologue: Is Oracle Screwed?

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0:31rings and listen now. Call Zone Media. Greetings and salutations, traveler. I'm your host, Ed Zitron, and this is your Better Offline monologue for the week.

0:49Better Offline. Blood is running through the stock market as everybody realizes at once shit I've been saying since 2024. that generative AI costs too much, loses 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$45-55 billion to fund data centers for OpenAI, which timed poorly with a story running that NVIDIA was no longer doing its$100 billion investment in OpenAI, something you all know was the case because it was on this podcast months ago and has been multiple times since.

1:29To catch you up, last September, Oracle announced a$300 billion five-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, there's only like 200 megawatts of power out there. They need a lot more than that. That's meant to be a 1.2 gigawatt center. Not great. Now, several other data center projects are allegedly in the works too. Stargate Shackleford, Texas in Wisconsin, Stargate New Mexico, and theoretically at least Stargate Michigan, through Blue Owl, who invested in basically every Stargate project and pulled out of Michigan due to financing conditions souring.

2:19Oracle had previously raised$56 billion in bonds and debt, with$38 billion of that, specifically earmarked for Shackleford and Wisconsin. That debt is payable over four years, with two one-year extensions, and payments for 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 a 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 in 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 dollars which is less than 189 billion dollars may seem obvious but i don't know the fucking markets don't appear to be able to count.

3:20Now, the other problem Oracle has is that the only way it can pay these loans off is if OpenAI 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 Azure Cloud in 2025 was$75 billion. How does OpenAI 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.

4:00Now, NVIDIA, of course, went out to say that they would absolutely be investing a lot of money in OpenAI's supposed upcoming round, this$100 billion one, different to this$100 billion deal they were talking about. OpenAI is currently raising$100 billion, dollars allegedly but nvidia is only putting 20 billion dollars 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 sat there going well you know we love your deal it's the best deal ever sounding like sylvester the cat and jensen is just cutting over him saying what open ai is amazing no drama no drama at all and And let me tell you something.

4:44The reason he's saying no drama is because OpenAI also leaked a thing saying that Sam Altman and OpenAI were unhappy with NVIDIA chips. It's all so good. 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 OpenAI deal has zero impact on our financial relationship with OpenAI. We remain highly confident in OpenAI's ability to raise funds and meet its commitments. Sadly, Oracle's The NVIDIA OpenAI 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.

5:28Jokes aside, that's the kind of thing the Alex Wilhelm tech reporter said is 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 didn't fucking kill anyone. People are going to, people are probably going to ask why you need to bring that up at this time. The other part of that statement that got me, it was, we're highly confident in OpenAI's ability to raise funds. They're not paying this out of cash flow. So Oracle is just depending their entire existence on OpenAI's ability to raise some venture capitalists.

6:03It'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 Cerner healthcare IT infrastructure just to make it through. And again, they paid$28 billion for Cerner and TD Cohen said that would be$8 to$10 billion worth of cash flow. Again, nowhere near$189 billion. Look, look, I need people to realize that Oracle cannot afford this build-out. It's committed to building 10 gigawatts of capacity for OpenAI, meaning that on top of the$189 billion it needs already, Oracle needs another $231 billion just to build those data centers.

6:47And 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 loses billions and billions of dollars. And yes, Larry Ellison's wealth is almost entirely tied up in Oracle stock, which is currently hurtling towards hell with a velocity reserve for Thatcher and Reagan. I know you're going to 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 deal's not about 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 because they want to do the propaganda thing and guess how tiktok makes money uh ads and how does tiktok show ads well they keep you on the app with the algorithm.

7:48How do you think this is going to 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 Guide 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 to levels they've never seen, and even then, they cannot afford the payments unless OpenAI can pay them more than anyone has ever paid for cloud, ever.

8:29Oh no, I'm excited. I don't hold stock. And until we know more, I really only have one question. Is that good?

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