Why OpenAI’s $300 billion deal with Oracle has set the ‘AI bubble’ alarm bells ringing

Core Insights - Oracle has entered a significant $300 billion deal with OpenAI, which has raised concerns about an 'AI bubble' in the market [1] - The company reported a staggering $455 billion in contracts, marking a 359% increase year-over-year, leading to a 36% surge in its stock price [2] - Oracle's strategic acquisition of Nvidia GPUs has positioned it as a key player in AI infrastructure, contributing to a 45% stock gain this year [3] Financial Performance - Oracle's revenue projections include $455 billion in remaining performance obligations, heavily reliant on the OpenAI deal [4] - OpenAI's current annualized revenue stands at $12 billion, highlighting the disparity between its revenue and the size of the contract with Oracle [4] Market Concerns - Remaining performance obligations are not guaranteed revenue, raising alarms about potential financial risks associated with a single customer [5] - Recent studies indicate that 95% of AI pilot programs fail to yield meaningful returns, intensifying fears of an AI bubble amid high valuations and disappointing returns [6] - OpenAI's CEO has expressed concerns about the AI sector potentially being in a bubble, citing overvaluation and excessive investor enthusiasm [6]