Larry’s risky business

If you want to know whether the AI bubble is bursting, there’s only one publicly traded company that will tell you: Oracle.

Larry’s risky business

Oracle’s betting everything on OpenAI. Will it pay off or pop the bubble?

That’s right, the database company. Oracle has burned its boats and pivoted to AI, but not in any kind of usual way. It is not a foundation model builder like OpenAI or Anthropic, obviously. It’s not quite a neocloud, though it has entered the same bare-metal business as CoreWeave. It is a software-as-a-service company that has made an audacious bet on a very specific future version of AI as Oracle’s traditional business has gracefully declined. It is significantly older than any of its AI competitors, save Microsoft, and it has decided its future involves an enormous compute deal with OpenAI, a company that does not make money.

Whether OpenAI is good for its commitments to Oracle depends a lot on how much money it can raise and how quickly it can become profitable. The risk for Oracle is that it may be sinking a lot of money into building data centers for OpenAI, only for OpenAI to be unable to pay Oracle the $300 billion it agreed to in their contract. Oracle and OpenAI did not respond to requests for comment.

But the OpenAI play — and the pivot to AI generally — suggests a specific vision: The key place to make money isn’t training foundation models. The real money is inference, or using AI models to output results on data that isn’t in the training set. So the company has looked at some startups’ businesses and decided that they are actually just features that can be added to Oracle’s existing capabilities — which is pretty much what Oracle has been up to for the entirety of its existence.

Oracle, of course, is already an enterprise business, so it has the existing relationships and large salesforce to go out there and sell its vision, one that suggests there isn’t much room for the AI stack to fragment. Rather, it will consolidate under existing players. Oracle intends to be the dominant player in that game.

Wall Street wants to bet on AI, and it can’t bet on OpenAI because it’s not public yet. So the best way to do it now is through Microsoft and Oracle. Microsoft has a more complicated business, so it’s not a pure AI bet. Oracle, on the other hand, is cleaner. That means you can take the temperature of the entire AI boom by checking in on how many people are betting Oracle won’t repay its loans on time — those are the credit default swaps. Oracle’s stock price also reacts to assorted and sundry industry events, providing a bellwether about the AI revolution — or the AI bubble, depending on how you view it.

But there’s always a tremendous gap between vision and execution, as Oracle’s history shows.

“The orthodox company is low-growth and high-margin and makes him feel old and uncool.”

Let’s get it out of the way: Oracle founder Larry “Bad Doggy” Ellison is out of his fucking mind. He has a short attention span, a willingness to promise things his engineers have not yet built, a tremendous ego, and a competitive drive that could power every AI data center on Earth and then some. Ellison is nominally the chief technology officer and executive chairman of Oracle, and Clay Magouyrk and Mike Sicilia are nominally the co-CEOs. But Oracle has always been the Larry show, starring Larry, even when he’s busy cheating at yacht races or whatever.

Oracle’s move to focus on AI means leaving behind the high-margin, low-growth, low-capital-expenditure database business that is Oracle’s bread and butter to jump to the low-margin, high-growth, high-capex neocloud business that Oracle has taken out $43 billion in debt to build in just fiscal 2026. Why do that? Well, according to Paul Kedrosky, a longtime VC at SK Ventures, Larry got bored.

“This is the story of Larry forever,” says Kedrosky. “Whenever he left to go sailing, he’d say, ‘This company’s not as much fun as it used to be.’ The high-level take is that the orthodox company is low-growth and high-margin and makes him feel old and uncool.”

In the 1990s, one of the reasons that Oracle became a hot property was Ellison. He was among the various futurists making predictions about what the internet would do to society. In 1996, Ellison appeared on The Oprah Winfrey Show to hype what he called “the network computer.” (As part of the appearance, Oracle promised to give a network computer to each of almost 300 kids at a primary school in Menlo Park.) This was a lightweight device, even one that could be treated as a throwaway, that would connect to applications stored online. If you are thinking, Boy, that sure sounds like a modern phone, you’re right. If you are also thinking, Boy, that sure sounds like the cloud, you’re also right.

The network computer flopped. The iPhone, which kicked off the modern era of lightweight, disposable computing devices, was introduced more than a decade later, in 2007. Oracle veered away from its bold vision of the cloud, while a true believer peeled off to form his own company: Marc Benioff, who founded Salesforce in 1999. Amazon’s AWS venture into cloud computing was in 2006, a decade after Ellison had predicted that people wouldn’t need to keep software on their own computers.

So why didn’t Oracle lead both of those revolutions, if Ellison saw them coming a decade out? Well, the iPhone was a consumer product, and Oracle made primarily enterprise databases. Oracle knew how to sell to businesses — it’s why they’d so thoroughly stomped competition such as Relational Technology Inc. and Cullinet in the first place — but Ellison didn’t know how to make consumers choose to buy things rather than get forced to use it by their employer.

The failure of the network computer also made Ellison weirdly recalcitrant about the cloud. He refused to take a second crack at the idea until 2011, even mocking it as “complete gibberish.” Oracle never really recovered from its lost lead. Despite its strong enterprise software business, it lags Amazon, Google, Microsoft, and Alibaba in market share, and is barely ahead of Salesforce. Given Ellison’s competitive streak — one of his biographies is titled Everyone Else Must Fail — this has to sting. The worst part might have been losing to one of Oracle’s biggest rivals, Microsoft.

Still, the majority of Oracle’s business, as of its most recent earnings results, is “cloud and software.” The category represented 88 percent of the company’s revenue in the three months ended February 28th, which is the third quarter in Oracle’s 2026 fiscal year. (There are also hardware and services businesses, but for our purposes, they are negligible.) The majority of that is software support, which “substantially all” customers renew every year “in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements” to the applications and infrastructure they also use. That brought in a shade under $5 billion in Oracle’s third quarter. The next biggest was “cloud infrastructure,” which had revenue of about $4.9 billion.

The customer support business had zero percent growth in the third quarter. Its database and applications businesses, though very profitable, aren’t growing and may even be declining, says analyst Gil Luria of DA Davidson.

The cloud business, on the other hand, is growing. It’s an “okay business, very fast-growing with low profitability,” says Luria. “Oracle cloud has single-digit margins, maybe at best teens. But they’ve been growing it very fast.”

So when ChatGPT launched the modern era of AI hype in Silicon Valley, it was inevitable that Ellison would take an interest. By February 2025, Ellison was telling former UK Prime Minister Tony Blair that AI was “a much bigger deal than the Industrial Revolution, electricity, and everything that’s come before.” In September, Oracle “shocked the markets” with a $300 billion deal with OpenAI to build d