Oracle's Secret Weapon Against AI Customer Risk Has a Fatal Flaw

Core Viewpoint - Oracle is rapidly expanding its AI infrastructure capabilities through significant contracts, particularly with OpenAI, which has led to a substantial increase in its remaining performance obligations (RPO) to $523 billion [1][2]. Group 1: AI Infrastructure and Customer Contracts - Oracle has over 700 AI customers, with OpenAI being a major contributor to its RPO growth, attributed to a $300 billion cloud infrastructure deal [2]. - The company can quickly reallocate AI computing capacity between customers, taking only a few hours to do so, which minimizes customer concentration risk [5][7]. - Oracle's ability to shift capacity allows it to maintain high utilization rates, crucial for its gross margin, as downtime would negatively impact profitability [8]. Group 2: Market Risks and Future Outlook - While current demand for AI infrastructure exceeds supply, there is a potential risk of oversupply in the future, which could pose significant challenges for Oracle if a major customer fails to pay [9][10]. - Major tech companies are independently building substantial AI capacity based on optimistic demand forecasts, leading to concerns about future market saturation [11]. - Oracle's reliance on OpenAI for fulfilling its commitments raises concerns about financial stability in an oversupply scenario, which could become a significant risk in the coming years [12][13].