Oracle is Genuinely Far Scarier Than Blackrock

A tech company's recent surge in market value, driven by AI promises, masks underlying financial peculiarities. Despite reporting lower-than-expected earnings, its stock soared by over 30% in a single day, adding more market capitalization than McDonald's. This boom is largely attributed to aggressive expansion in AI infrastructure support, building massive data centers and selling access to companies lacking the resources to do so themselves.

This expansion is fueled by nearly half a trillion dollars in backlogged AI orders, a figure that appears unsustainable and concentrated among a few major clients, including OpenAI's significant commitment. The company is effectively leveraging external investment money to book future revenue, creating an illusion of greater promise than reality. Furthermore, the company is gaining significant influence through its role in the US operations of a popular social media platform, which includes monitoring its algorithm and accessing user data.

Beyond its AI infrastructure and data platform control, the company's founder's son is amassing power in the traditional media landscape, acquiring stakes in major entertainment companies and exploring further consolidation. This expansion, combined with the founder's age and potential estate transfer, suggests a future where one family could wield immense influence across social media, AI infrastructure, and traditional media.

• A tech company experienced a 30%+ stock surge despite underperforming financial results, driven by AI hype.
• The company is aggressively expanding its AI infrastructure, securing nearly half a trillion dollars in backlogged orders from AI companies.
• A significant portion of these orders, over $300 billion, comes from one client with questionable ability to fulfill the commitment, raising concerns about financial sustainability.
• The company is set to gain significant control over a popular social media platform's US operations, including its algorithm and user data.
• The founder's son is building a media empire, potentially creating a combined powerhouse influencing social media, AI, and traditional media.

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Financial Shenanigans and AI Hype [00:00]

• The company experienced a significant stock increase of over 30% in a single day, despite reporting worse-than-expected financial results, including lower earnings per share and revenue.
• This surge added more market capitalization than McDonald's within 8 hours.
• The company, historically known for providing software subscriptions to enterprise customers, is now benefiting from big promises about the future of AI.
• The founder's net worth reportedly increased by $70 billion in one day due to these events.

This is all from a company that has historically provided boring software subscriptions to boring enterprise customers.

AI Infrastructure Expansion and Unsustainable Orders [02:30]

• The recent rise in the company's stock price is largely due to its aggressive shift into AI infrastructure support, building massive AI data centers and selling access to them.
• Investors are surprised by the rate of expansion in this business segment.
• The company has rebranded itself as an AI startup, attracting investor exuberance.
• They announced almost half a trillion dollars ($455 billion) in backlogged orders from AI companies for their expanding infrastructure.
• This number alone fueled the stock surge, overshadowing other underwhelming financial metrics.
• Concerns exist that this spending is unsustainable, with $455 billion representing more than 2% of US GDP from one company's contracts.
• The large spending suggests generative AI needs to radically reshape the world to justify the investment.

But the economy destabilizing scale of AI investments is not even the biggest problem with these oracle numbers.

Concentration of Orders and Client Dependency [04:43]

• The CEO's financial letter revealed that almost all of this money is coming from just four contracts with three individual clients.
• This implies clients are spending over $150 billion each on renting data centers.
• The biggest new client, OpenAI, plans to spend over $300 billion with the company over the next 5 years.
• OpenAI reportedly does not have $300 billion to fulfill this commitment and will need more investor money.
• In a coincidental development, Nvidia announced a $100 billion investment into OpenAI to help develop its computer infrastructure.
• The company is building its computing capabilities using billions of dollars worth of Nvidia GPUs.
• This process is described as turning outside investor money into deferred revenue on the next company, making businesses appear more promising than they are.

So uh yeah, all they are doing is effectively turning outside investor money into deferred revenue on the next company over which is making these businesses look more promising than they really are to even more outside investors.

Political Influence and Social Media Platform Control [07:41]

• The company and its founder have historically spent millions on political donations and lobbying, with the founder being a significant political spender.
• Senior executives have also held key government positions.
• The company has been selected to handle the US operations of a social media platform, using its cloud infrastructure.
• This deal will grant the company influence over the platform's algorithm and access to sensitive user data.
• The tender process for this deal is questioned, with independent estimates suggesting the platform's valuation of $14 billion is well below market value.
• The American operation is being forced to sell, and compared to a competitor like Instagram, the platform should conservatively be worth 10 times more.

What hasn't been completely fair is the tender process to decide which particular tech giant would be gifted this valuable opportunity.

Media Empire Expansion and Synergistic AI Use [09:32]

• The founder's son started a media company in 2010 with reported seed capital of $350 million from his father and associates.
• This media company took over a major entertainment company, forming a new mega media entity that reportedly plans to acquire another major media company, potentially becoming one of the largest traditional media conglomerates in history.
• The cozy relationship with the government has raised eyebrows, with a show cancellation occurring during the assessment of the social media platform deal and current acquisitions.
• The company insists the cancellation was due to poor ratings, but the potential for an organization with this much influence to exert control is concerning.
• The son is a vocal supporter of using AI to lower costs in the movie production industry, described as a "worst-case scenario for AI."

So basically the worst use case for AI.

Succession Concerns and Combined Influence [11:05]

• The founder is 81 years old, and it is assumed he will pass down influence over the company to his son.
• This could result in one family controlling a major social media platform and traditional media platforms simultaneously.
• The situation is compared to a potential fusion of Rupert Murdoch and Mark Zuckerberg's influence.
• The company and its related entities are more low-key to the average person compared to competitors like Disney or Facebook, but could soon become equally important.

So if you ever wondered what happened if we mixed Rupert Murdoch with Mark Zuckerberg, we may be about to find out.