Oracle on cloud nine, AI bets paying off

Oracle just crashed into the AI party, not by tweaking the technology but by renting out its cloud computing infrastructure. The surge in the database company's stock briefly made its owner, Larry Ellison, the world's richest man. His wealth surged to $393 bn on Wednesday, surpassing Elon Musk's $385 bn, according to Bloomberg Billionaires Index. Oracle is now betting the farm on AI, pumping more money than it ever has into data centres to offer cloud computing and storage solutions to clients like OpenAI. In this, it joins Alphabet, Meta and Microsoft that are scaling up cloud infrastructure. Unlike them, Oracle is not getting into the battle of bots, which makes its bet dependent on OpenAI's delivery, now in an intense phase of cash burn. Other AI companies are also struggling with their LLMs.

Nvidia is providing shovels and Oracle is offering canteens to AI panhandlers. Now it's a waiting game for whether this will be a flash in the pan. AI is expected to require enormous computing power to do exactly what nobody quite has a fix on. Consumers are underwhelmed with the available chatbots, and companies find them unusable. Investors don't seem too concerned, though, and AI valuations' party rages on. Oracle did report sedate numbers along with its eye-popping projections, yet its stock zoomed past its dotcom-era surge. The company was fairly grounded until it made its estimate of cloud infrastructure revenue, which effectively hangs a number on the AI business down the line. Being Oracle, that number carries credibility.

Saner voices are emerging in the AI race. Apple is downplaying its AI promise after initial delivery. The company can afford to let the software firms slug it out while it works on its hardware. That sits well with its vendor model, which should apply when AI victors emerge. For the rest, though, AI will remain an investment treadmill. Oracle just got on it-but it needs to know when to get off.