Speaker 1: Media. Greetings and salutations, traveler. I'm your host ed Xetron
Speaker 1: and this is your better offline monologue for the week. Also,
Speaker 1: blood is running through the stock market as everybody realizes
Speaker 1: that once shit I've been saying since twenty twenty four,
Speaker 1: the generative AI costs too much, loses everybody money, and
Speaker 1: doesn't have the growth potential to make any of this
Speaker 1: shit worth it. Yet this has been a week for
Speaker 1: the more sophisticated haters, with Oracle stock plummeting on the
Speaker 1: news that it had to raise another forty five to
Speaker 1: fifty five billion dollars to fund data centers for open Ai,
Speaker 1: which timed poorly with a story running that in video
Speaker 1: was no longer doing its one hundred billion dollar investment
Speaker 1: in open Ai, something you will know was the case
Speaker 1: because it was on this podcast months ago and has
Speaker 1: been multiple times since. To catch you one. Last September,
Speaker 1: Oracle announced the three hundred billion dollar, five year long
Speaker 1: deal to provide compute to open Ai, powered by four
Speaker 1: point five gigawatts of compute capacity that at the time
Speaker 1: and at this time did not and does not exist
Speaker 1: as far as I can tell, only two hundred megawats
Speaker 1: of Stargate Abilene, a project that's been a work in
Speaker 1: progress since twenty twenty four, appears to be complete, and
Speaker 1: to my knowledge as well, there's only like two hundred
Speaker 1: megawats of power out there. They need a lot more
Speaker 1: than that. That's meant to be a one point two
Speaker 1: gigawat center. Not great now. Several other data center projects
Speaker 1: are allegedly in the works too, Stargate Shackleford, Texas and Wisconsin,
Speaker 1: Stargate New Mexico, and theoretically at least Stargate Michigan through
Speaker 1: Blue Owl, who invested in basically every Stargate project and
Speaker 1: pulled out of Michigan due to financing conditions. Souring Oracle
Speaker 1: had previously raised fifty six billion dollars in bonds and debt,
Speaker 1: with thirty eight billion of that specifically yearmarked for Shackleford
Speaker 1: and Wisconsin. That debt is payable over four years, with
Speaker 1: two one year extensions and payments for interest only until
Speaker 1: construc duction is complete. One little problem, I'm afraid. According
Speaker 1: to Jerome Darling at TD Cohen, it's upwards of forty
Speaker 1: two million dollars in megawatt to build a data center.
Speaker 1: Completing these data centers is going to cost at least
Speaker 1: one hundred and eighty nine billion dollars for the four
Speaker 1: and a half gigawats an Oracle was and is short
Speaker 1: by quite some measure, so it sold twenty five billion
Speaker 1: dollars more in bonds and plans to sell another twenty
Speaker 1: billion dollars of stock in an at the money share sale,
Speaker 1: literally printing new shares and dumping them onto the market
Speaker 1: in intervals set by the bankers behind the deal. Mathematicians
Speaker 1: in the audience have likely run the numbers at this
Speaker 1: point and worked out that this is only one hundred
Speaker 1: and one billion dollars, which is less than one hundred
Speaker 1: and eighty nine billion dollars. May seem obvious, but I
Speaker 1: don't know. The fucking markets don't appear to be able
Speaker 1: to count. Now. The other problem Oracle has is that
Speaker 1: the only way it can pay these loans off is
Speaker 1: if open Ai is able to pay them, and I
Speaker 1: need to be clear how difficult that will be. That
Speaker 1: three hundred billion dollar, five year long compute deal guarantees
Speaker 1: that at least one year will be over eighty billion
Speaker 1: dollars in payments. For some context, the entire revenue of
Speaker 1: MICROSOFTS as your cloud in twenty twenty five was seventy
Speaker 1: five billion dollars. How does open ai pay that, especially
Speaker 1: when Oracles' build capacity but they don't have the money.
Speaker 1: They only allegedly made thirteen billion dollars last year and
Speaker 1: lost nine billion dollars on top of that. How the
Speaker 1: hell do they pay this? I don't know, but everyone
Speaker 1: seems to think they will, or at least they did now.
Speaker 1: In video, of course, went out to say that they
Speaker 1: would absolutely be investing a lot of money in open
Speaker 1: AI's supposed upcoming round, this one hundred billion dollar one.
Speaker 1: Different to this one hundred billion dollar deal they were
Speaker 1: talking about. Open ai is currently raising one hundred billion
Speaker 1: dollars allegedly, but in video is only putting twenty billion
Speaker 1: dollars in. And Jensen went on CNBC with Jim Kramer
Speaker 1: and had the most bizarre conversation I'll link to it
Speaker 1: in the episode notes. He was just saying, oh, yes,
Speaker 1: open ai is wonderful, cutting over Jim Kramer's Jim Kramer
Speaker 1: just said they going, well, you know, we love your deal.
Speaker 1: Is to base to bash this deal ever, sounding like
Speaker 1: Sylvester the Cat, and Jensen is just cutting over him
Speaker 1: saying what open a ey is amazing. No drama, no
Speaker 1: drama at all. And let me tell you something. The
Speaker 1: reason he's saying no drama is because open ai also
Speaker 1: leaked a thing saying that that Sam Altman and open
Speaker 1: Ai were unhappy with in video chips, it's all so good.
Speaker 1: This is this is the kind of stuff that happens
Speaker 1: when things are going well and well. Oracles saw this,
Speaker 1: and Oracles saw this back and forth, and they thought,
Speaker 1: we need to help, we need to help the markets.
Speaker 1: So they put out a tweet and I'm just going
Speaker 1: to read it to you. The in video open Ai
Speaker 1: deal has zero impact on our financial relationship with open Ai.
Speaker 1: We remain highly confident in open aiy's ability to raise
Speaker 1: funds and meet its commitments. Sadly, Oracles, the in video
Speaker 1: open Ai deal has zero impact on our financial relationship.
Speaker 1: T shirt appears to have people asking them a lot
Speaker 1: of questions already answered by the shirt jokes aside, that's
Speaker 1: the kind of thing that Alex Wilhelm tech reporter said.
Speaker 1: It's bank run language. You don't that will always have
Speaker 1: the opposite effect saying, well, it's I said this on
Speaker 1: an interview recently. It's like walking into the room and
Speaker 1: saying I didn't fucking kill anyone. People are gonna people
Speaker 1: are probably gonna ask why you need to bring that
Speaker 1: up at this time. The other part of that statement
Speaker 1: that got me was we're highly confident in open AI's
Speaker 1: ability to raise funds. They're not paying this out of
Speaker 1: cash flow, so Oracle is just depending their entire existence
Speaker 1: on open AI's ability to raise some venture capitalists, it's
Speaker 1: all very good, it's all very very good, and it
Speaker 1: all times very very poorly, with a TD Cohen analyst
Speaker 1: letter that suggested Oracle would have to fire upwards of
Speaker 1: twenty five thousand people and potentially sell its valuable set
Speaker 1: SNA healthcare IT infrastructure just to make it through. And
Speaker 1: again they paid twenty eight billion dollars with Serna, and
Speaker 1: TD Cohen said that would be eight to ten billion
Speaker 1: dollars worth of cash flow, again nowhere near one hundred
Speaker 1: and eighty nine billion dollars. Look, look, I need people
Speaker 1: to realize that Oracle cannot afford this out. It's committed
Speaker 1: to building ten gigawats of capacity for open Ai, meaning
Speaker 1: that on top of the one hundred and eighty nine
Speaker 1: billion dollars it needs already. Oracle needs another two hundred
Speaker 1: and thirty one billion dollars just to build those data centers.
Speaker 1: And on its last earnings, Oracle had a cash flow
Speaker 1: of negative thirteen billion dollars. It's it's not looking very positive.
Speaker 1: And yes, Oracle also just bought TikTok, a business that
Speaker 1: also but it loses billions and billions of dollars. And yes,
Speaker 1: Larry Ellison's wealth is almost entirely tied up in Oracle stock,
Speaker 1: which is currently hurtling towards hell with a velocity reserve
Speaker 1: for Thatcher and Reagan, I know you're gonna listen to this,
Speaker 1: and I hear from a lot of you. No matter
Speaker 1: how many times I say this, everyone's like, oh, the
Speaker 1: two deals are not about it's not about making money.
Speaker 1: It's about political influence. Wow, you're the first fucking person
Speaker 1: to tell me that. No one has ever told me
Speaker 1: that other than the first one hundred and fifty fucking people.
Speaker 1: Not an original thought and also not a particularly effective one.
Speaker 1: The algorithm on ticketok is already shitting its pants because
Speaker 1: Oracle can't stop messing with it because they want to
Speaker 1: do the propaganda thing. And guess how TikTok makes money
Speaker 1: ads and how does TikTok show ads? Well, they keep
Speaker 1: you on the app with the algorithm. How do you
Speaker 1: think this is gonna work? I know it all feels
Speaker 1: a little ridiculous, but there really is a future in
Speaker 1: which Oracle collapses. Larry Ellison's stock is entirely tied up
Speaker 1: in Oracle, and I just did a story called the
Speaker 1: Hater's God to Oracle in my premium newsletter that goes
Speaker 1: through this. But this is a company in a company,
Speaker 1: I'm just keeping it a company in decline, and they
Speaker 1: are really looking quite shaky. And even if they weren't
Speaker 1: in decline, the amount of money they're trying to spend
Speaker 1: here is genuinely impossible for them to afford. They are
Speaker 1: going to have to stress the debt markets the levels
Speaker 1: they've never seen, and even then they cannot afford the
Speaker 1: payments unless open Ai can pay them more than anyone
Speaker 1: has ever paid for Cloud ever. Ah nah, I'm excited.
Speaker 1: I own to hold stock, and until we know more,
Speaker 1: I really only have one question. Is that good? H