OpenAI's spending spree is powering the tech industry. Oracle is the latest winner

Core Insights - OpenAI's significant spending on cloud computing is a key driver behind the recent stock surge of Oracle and other tech companies [2][4][11] - The combined market capitalization of Oracle, Broadcom, Microsoft, and Nvidia has increased by over $4.5 trillion since OpenAI's public emergence with ChatGPT in late 2022 [4] - OpenAI's valuation stands at $500 billion, supported by a limited number of investors amid competition from major players like Meta and Google [6] Oracle's Performance - Oracle's stock experienced a 36% increase, its largest gain since 1992, following the announcement of multibillion-dollar contracts, including one with OpenAI [7] - The company's performance obligations surged by 359% year-over-year to $455 billion, with concerns about the concentration of this backlog with OpenAI [9] - Oracle's market cap reached approximately $930 billion before retreating to $830 billion, positioning it close to the trillion-dollar club [13] OpenAI's Financial Commitments - OpenAI is expected to spend $300 billion on computing power over five years starting in 2027, with additional commitments to other cloud providers [8][10] - The company anticipates annual recurring revenue to grow from $10 billion in June to $125 billion by 2029 [11] - OpenAI is transitioning to a for-profit entity while maintaining oversight from its nonprofit parent, which will hold an equity stake valued at over $100 billion [12] Market Reactions and Expert Opinions - Analysts express skepticism about Oracle's long-term prospects in AI, citing its historical challenges in cloud infrastructure compared to competitors [14] - The perception of Oracle as a leading player in AI has shifted rapidly following its earnings report, but some experts remain unconvinced of its capabilities [15]