Email
\n <\/a><\/p>\n
Link<\/p>\n
\n A version of this story appeared in CNN Business\u2019 Nightcap newsletter. To get it in your inbox, sign up for free here<\/a>.\n<\/p>\n New York \n Oracle, a large but generally sleepy cloud-computing company, just had an absolutely bonkers day on Wall Street.\n <\/p>\n \n The stock (ORCL<\/a>) shot up more than 40% Wednesday morning, its largest single-day jump ever. It was such big leap that it minted Oracle co-founder Larry Ellison<\/a> $100 billion in less than hour, making him the world\u2019s richest person and bumping Elon Musk<\/a> to second place.\n <\/p>\n \n The catalyst wasn\u2019t a flashy product rollout or a surprise earnings beat \u2014 in fact, Oracle\u2019s quarterly revenue and profit came in below Wall Street\u2019s expectations Tuesday evening.\n <\/p>\n \n Instead, the fire came from Oracle\u2019s outlook for the next few years, which, if it pans out, would cement the company as a power player in artificial intelligence. That\u2019s a big \u201cif,\u201d though \u2014 especially given that the bulk of Oracle\u2019s rosy outlook hinges on revenue from one major customer, the unprofitable OpenAI, according to the Wall Street Journal.<\/a>\n <\/p>\n \n Oracle\u2019s outlook is \u201cso exuberant that if we\u2019d gotten this sort of prediction from a less established company it might have been shrugged off as either a lie or a misplaced digit,\u201d Steve Sosnick, chief strategist at Interactive Brokers, told me.\n <\/p>\n \n Here are the key things powering Oracle\u2019s stock at a clip it hasn\u2019t experienced since the late-90s dot-com-bubble era, when it rose nearly 600% in the span of a year before falling back to earth by 2002:\n <\/p>\n Oracle\u2019s CEO, Safra Catz, said the company\u2019s cloud infrastructure revenue would grow 77% to $18 billion by the end of May 2026. But that\u2019s not all: It projects that revenue to hit $144 billion by 2030.<\/p>\n Catz said Oracle had signed four multi-billion-dollar contracts with three different customers, giving the company $455 billion in \u201coutstanding contract revenue\u201d that it expects to collect on. That metric is up 359% from last year.<\/p>\n \n Oracle, which sells database software, has somewhat quietly ingratiated itself to investors in the AI gold rush this year by securing deals<\/a> with AI companies hungry for computing capacity. (If semiconductor giant Nvidia (NVDA<\/a>) is the \u201cpicks and shovels\u201d play of the current frenzy, think of Oracle as the Levi Strauss play \u2014 it\u2019s not mining the gold, just providing durable trousers.) And now it\u2019s making its debut as a force to be reckoned with against rival cloud-storage providers like Google, Amazon and Microsoft.\n <\/p>\n \n If Oracle\u2019s head-spinning projections seem too good to be true, well, that\u2019s all part of the fun-house mirror effect of the generative AI bubble (yes, I said \u201cbubble\u201d<\/a>). Because for any of Oracle\u2019s future projections to make sense, its AI customers, including OpenAI, have to make, like, a lot of money \u2014 something the ChatGPT maker has shown no clear path to doing anytime soon. (The Information reported<\/a> last week that OpenAI\u2019s projected cash burn this year through 2029 will hit $115 billion \u2014 about $80 billion higher than the company previously expected.)\n <\/p>\n \n Like other big tech names, Oracle is betting much of its future on the promise that demand for computing capacity will keep going up as generative AI ushers in some kind of as-yet-undefined revolution. So tech companies are spending hundreds of billions of dollars to build out the data centers \u2014 giant, energy-sucking buildings full of computer servers \u2014 to ensure the US has the technical infrastructure to deliver all of the AI magic.\n <\/p>\n \n That gamble on infrastructure is so massive it actually eclipsed consumer spending this year as the main driver of GDP growth, according to Renaissance Macro Research.<\/a>\n <\/p>\n \n \u201cThis data center buildout continues to be a major support to the US economy\u2026 so we of course hope that Larry Ellison is right and that this massive buildout is sustainable,\u201d Peter Boockvar, chief investment officer of One Point BFG Wealth Partners, said in a note Wednesday.\n <\/p>\n \n But Boockvar also sounded a note of caution: \u201cWhile Oracle just knocked the cover off the ball, when I see one day market cap increases of such epic proportions, I can\u2019t not think of what I witnessed in 1999.\u201d\n <\/p>\n \n (Ahem, 1999 being the start of the dot-com crash.)\n <\/p>\n \n Oracle\u2019s capital expenditures are \u201ctruly extraordinary,\u201d at $35 billion for this fiscal year, which is about 52% of revenue, Boockvar notes. In 2024, it was 13% of the company\u2019s revenue. \u201cWe\u2019ve never seen such capital intensity from these previously large-free-cash-flow-generating businesses.\u201d\n <\/p>\n \n In other words, Oracle is a huge company, and it\u2019s never spent money like this ever before.\n <\/p>\n \n The risk here, of course, is that Oracle\u2019s big customer, OpenAI, doesn\u2019t deliver.\n <\/p>\n \n Generative AI, the engine of ChatGPT, is one of those rare technologies that manages to get less marketable<\/a> over time. The more many regular people encounter AI in their lives, the more they come to associate it with \u201cslop\u201d<\/a> on their Facebook feeds. Chatbots cannot reliably respond to human beings\u2019 queries, and they have a pesky tendency of dragging said humans into delusional<\/a>, at times deadly<\/a>, mental spirals.\n <\/p>\n \n It isn\u2019t completely useless, to be sure, but AI\u2019s proponents have had an extremely difficult time building an application that\u2019s lived up to their own hype (nor, certainly, has any of it lived up to the lofty valuations propping up American tech companies).\n <\/p>\n \n Without a game-changing tech update that either drastically lowers its costs or dramatically boosts its profits, OpenAI may be toast. And that presents a systemic risk to not just Oracle, in particular, but to the tech sector more broadly.\n <\/p>\n \n If Oracle can stick the landing, Sosnick said, \u201cthen by all means, this rally is well-deserved.\u201d\n <\/p>\n \n \u201cYet you are correct in pointing out the risks inherent in the market\u2019s complete revaluation of Oracle\u2026 Not only are Oracle stockholders crucially dependent upon the company meeting its guidance, but the broader market is, too.\u201d\n <\/p>\n","protected":false},"excerpt":{"rendered":"Facebook Tweet Email Link A version of this story appeared in CNN Business\u2019 Nightcap newsletter. To get it…\n","protected":false},"author":2,"featured_media":135589,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[256,254,255,64,63,105],"class_list":{"0":"post-135588","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-au","12":"tag-australia","13":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/135588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=135588"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/135588\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/135589"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=135588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=135588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=135588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n \u00a0\u2014\u00a0<\/p>\n![\"Oracle](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/09\/gettyimages-2194585229.jpg\")
<\/p>\n