The post OpenAI is the root cause of all of Oracle’s problems appeared on BitcoinEthereumNews.com. Oracle is locked into heavy dependence on OpenAI, and that dependenceThe post OpenAI is the root cause of all of Oracle’s problems appeared on BitcoinEthereumNews.com. Oracle is locked into heavy dependence on OpenAI, and that dependence

OpenAI is the root cause of all of Oracle’s problems

2025/12/11 20:33

Oracle is locked into heavy dependence on OpenAI, and that dependence is driving every problem the company is dealing with right now.

The company spent five decades building a huge base of enterprise clients, yet its fate has never been tied to a single customer the way it is today.

That shift happened after Oracle agreed to provide $300 billion in AI-computing services to OpenAI, alongside a list of other large deals OpenAI signed, even though it brings in less than $20 billion a year.

Three months later, every part of Larry El’s business is being judged through that one relationship.

The pressure grew after Google launched Gemini 3 last month. The model outperformed the latest version of ChatGPT, and it forced OpenAI leadership to issue what they called a “code red.”

Because OpenAI is a private company, investors have shown their concern by selling shares of companies most exposed to it. Oracle ended up being one of the biggest casualties. Its stock fell 32% over the last three months leading up to its fiscal second-quarter report.

That performance ranked as the third-worst on the S&P 500 at a time Oracle was nearing a $1 trillion valuation based on expectations that AI demand would double the company’s size.

Oracle absorbs rising costs as capex explodes

Oracle reported 14% revenue growth year over year in its latest quarter, its strongest rate in almost three years. The number still came in a bit below Wall Street expectations.

Oracle also added about $68 billion to its revenue backlog through new deals with Meta and Nvidia, though the company had already mentioned those deals during an October analyst meeting. The actual surprise came from spending. Oracle disclosed a record $12 billion in capital expenditures for the quarter ending in November, well above the $8.4 billion analysts expected.

The company raised its full-year capex forecast from $35 billion to $50 billion, which sent its stock down another 12% in after-hours trading.

A capex bill of that size represents 75% of Oracle’s projected revenue for the year. Over the past five years, the company averaged about 17%.

By comparison, Meta is expected to spend roughly 36% of its revenue on capex this year. The numbers show how much strain Oracle is taking on while trying to supply OpenAI and maintain the rest of its cloud clients.

Oracle carries massive obligations tied to OpenAI

Oracle’s spending is tied to more than data-center growth. OpenAI represents the majority of the company’s $523 billion in remaining performance obligations. These obligations are contracts for revenue that have not yet been recognized.

The total is nearly nine times the size of Oracle’s annual revenue. Cloud rivals like Microsoft, Amazon, and Google sit at far lower ratios. Microsoft, which is OpenAI’s primary computing partner, carries a backlog only about 1.4 times its revenue over the last four quarters.

Oracle’s future growth depends on OpenAI meeting those commitments. But few companies can take on deals at this scale, leaving Oracle with limited paths to diversify. The stability of those obligations also depends on the direction of AI demand and whether competitors like Google or Anthropic keep reducing OpenAI’s lead.

Gil Luria of D.A. Davidson said Oracle needed to use its quarterly report “to address concerns about the tricky balance of borrowing money to build out capacity for OpenAI, with the new understanding there is very low likelihood OpenAI will live up to its obligations.”

Oracle did not provide that clarity. The company burned a little more than $13 billion in cash over the last four quarters and now holds about $88 billion in net debt.

That stands in sharp contrast to rivals with large net-cash positions. Moody’s said last week that “Oracle has the highest exposure to OpenAI and has the weakest credit metrics among investment-grade hyperscalers.”

Oracle said Wednesday that it intends to protect its investment-grade rating as it finances its AI expansion, but investors are showing clear signs of frustration as the financial pressure keeps building.

Join a premium crypto trading community free for 30 days – normally $100/mo.

Source: https://www.cryptopolitan.com/openai-root-cause-of-all-of-oracles-problems/

Disclaimer: The articles reposted on this site are sourced from public platforms and are provided for informational purposes only. They do not necessarily reflect the views of MEXC. All rights remain with the original authors. If you believe any content infringes on third-party rights, please contact [email protected] for removal. MEXC makes no guarantees regarding the accuracy, completeness, or timeliness of the content and is not responsible for any actions taken based on the information provided. The content does not constitute financial, legal, or other professional advice, nor should it be considered a recommendation or endorsement by MEXC.

You May Also Like

Solana co-founder urges need for Bitcoin to adopt quantum resistance for future security

Solana co-founder urges need for Bitcoin to adopt quantum resistance for future security

The post Solana co-founder urges need for Bitcoin to adopt quantum resistance for future security appeared on BitcoinEthereumNews.com. Solana co-founder Anatoly Yakovenko is urging the Bitcoin community to begin transitioning to quantum-resistant security measures, warning that advances in quantum computing may arrive faster than expected. Speaking during a Sept. 18 session at the All-In Summit, said the accelerating pace of technological breakthroughs means Bitcoin should not wait until the threat is imminent. According to him: “We should migrate Bitcoin to a quantum-resistant signature scheme. This is my bet, and it’s because so many technologies are converging right now, and this asymptotic rate of AI and how fast it’s accelerating—going from a research paper to an implementation—is astounding. So I would try to encourage folks to speed things up.” Yakovenko’s position is unsurprising, as market concerns over Bitcoin’s vulnerability to quantum-powered attacks have gained momentum following companies like Google reporting advances in the space. Considering this, he argued that these major tech firms’ adoption of quantum-resistant cryptography should signal the right time for Bitcoin to migrate its security architecture. The Solana co-founder furthered: “My key for this is Google and Apple adopting a quantum-resistant cryptographic stack. This is the time to go migrate, because now the consumer side of it is effectively solved and you don’t have to kind of wait. So you watch where Google’s going.” However, despite Yakovenko’s warnings, industry experts remain split on the technological advancements timeline as some argue that breakthroughs could occur within this decade, while others contend that the risks remain distant. Regardless of when its implementation occurs, Yakovenko stressed that the technology would be both a challenge and an opportunity. He said: “For the general public, quantum computing is such a massive unlock in terms of how much we can process that it’s going to be as big of a wealth creator, if we pull it off, as AI.” Bitcoin remains resilient…
Share
BitcoinEthereumNews2025/09/19 23:06