Since Oracle announced its $300 billion deal with OpenAI On September 10, its shares have lost $315 billion in market capitalization, as they have stated since Financial Times. The technology company He has bet everything on a single card: Become the premier infrastructure provider for the world’s most valuable AI lab. Investors are not convinced.
The most expensive bet in its history. Oracle has tied its future to OpenAI in an unprecedented way in the technology industry. According to estimates At Jefferies, 58% of its future order book comes from a single customer: OpenAI. To put it in perspective, Microsoft has just 39% concentration with its largest customer, and Amazon 16%. Oracle has gotten into a mess and its business diversification has become a critical dependency on OpenAI.
The plan is ambitious but risky. Oracle’s strategy is to reach $166 billion in cloud computing revenue by 2030, according to counted the company last month. To achieve this, its investment budget in the current fiscal year ending in May amounts to $35 billion. The analysts wait that this annual expenditure will stabilize around 80,000 million in 2029.
But here’s the problem: Starting in 2027, most of that revenue would come from OpenAI, according to the calculations from RBC Capital Markets. That is, Oracle is not just building massive infrastructure, it is building massive infrastructure for a single tenant that has yet to prove its long-term commercial viability.
The numbers don’t add up yet. Oracle’s net debt already stands at 2.5 times its ebitda (earnings before interest, taxes, depreciation and amortization), more than double what it was in 2021, and is expected to almost double again by 2030. Its free cash flow is also expected to remain negative for five consecutive years, according to the forecasts collected by Bloomberg.
The company is financing with debt a gigantic server farm with the hope that OpenAI will generate enough revenue to justify the investment. Meanwhile, as has shared Financial Times, investors are so restless that the cost of insuring against a potential Oracle default is at a three-year high.
The contagion effect of OpenAI. Oracle is not the only company that has suffered after announcing agreements with OpenAI. Broadcom and Amazon too have seen their shares fallwhile NVIDIA has barely moved since its investment agreement in September. A few months ago, any type of association with OpenAI caused prices to rise, considering himself the King Midas of AI. The most notable case was AMD’s in Octoberwhen its shares rose 24% after announcing a chip deal that included company warrants. That halo effect seems to have completely faded.
Between the lines. The initial theory was that OpenAI was in a frantic race to catch up. general artificial intelligence (AGI) and that Oracle was the only company capable of scaling the necessary computing capacity at the required speed. Oracle promised the lowest upfront costs and the fastest path to revenue generation because it acted as a data center tenant, not an owner. Now investors are sending the signal that partnering with OpenAI is no longer a guarantee of success.
The alternative reality is less rosy: Oracle doesn’t have as much operating profit as its competitors to burn on R&D, so it’s betting everything to keep its only big customer in exchange for a promissory note. Amazon, Microsoft and Meta can afford to spend between 70,000 and 130,000 million a year in infrastructure. Oracle is juggling financials to keep pace.
And now what. Oracle has until mid-2026 to prove that your Abilene data center in Texas, with capacity for more than 400,000 GPUs and 1.4 gigawatts of power, can generate the promised returns. Meanwhile, the market has spoken and is awaiting evidence that this partnership will bear the promised fruits.
Cover image | Oracle and OpenAI
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