Oracle(US:ORCL) Hua Er Jie Jian Wen·2025-12-12 21:24Core Viewpoint - The largest cloud computing deal, "Stargate," originated from a LinkedIn message and has led to significant volatility in Oracle's stock, reflecting a cooling enthusiasm on Wall Street for AI investments [1][3]. Group 1: Deal Origin and Structure - The unprecedented deal was initiated by a LinkedIn message from OpenAI's infrastructure head to Oracle's sales team, leading to discussions about a partnership [3]. - OpenAI committed to spending approximately $300 billion to lease servers from Oracle, which requires the construction of about five large data center complexes [4]. - Oracle's plans for these data centers were initially ambitious, but reports of delays in completion have emerged, raising concerns about the project's viability [4]. Group 2: Financial Pressures and Market Reactions - Oracle faces significant financial pressure due to the high upfront investment required for the data centers, with costs exacerbated by rising material and labor prices [5]. - The company's aggressive strategy has resulted in negative free cash flow for the first time since 1992, leading to increased trading of Oracle credit default swaps [1][5]. - As OpenAI's spending increases, the value of each commitment appears to be declining, contributing to Oracle's stock price drop [6]. Group 3: Competitive Landscape and Strategic Decisions - Microsoft, a long-time partner of OpenAI, has expressed concerns about the capacity demands from OpenAI, leading to a decision to allow OpenAI to seek other cloud providers [8]. - Analysts suggest that Oracle's heavy investment in AI could be risky, as the economic impact of AI remains uncertain and the potential for a bubble is increasing [9][12]. - The deal structure allows OpenAI to reassess its commitments in about five years, which could leave Oracle with costly, illiquid assets if OpenAI's growth stalls [9]. Group 4: Leadership and Vision - Larry Ellison, Oracle's co-founder, remains a central figure in the tech industry, advocating for AI as a transformative technology [10][11]. - Despite his age, Ellison's focus on AI reflects a belief in its potential, but the current market sentiment is questioning whether Oracle has overcommitted to an unproven future [11][13].