Microsoft is winding down Oracle deal to rent AI cloud capacity(www.reuters.com)

75 pointsby brazukadev5 hours ago2 comments

tonoto5 hours ago
Ouch, investment in GPU isn't a one off, you also need to invest newer generations (that naturally comes with a bigger price tag) to attract customers long term. How will this business ever become profitable before the bubble bursts?
- Twirrim5 hours ago
  You're somewhat assuming there aren't customers lined up wanting capacity.
  - segfaultex4 hours ago
    To what extent is that demand from frontier labs? Purportedly, Anthropic is a significant chunk of GCP rev.
    How much runway will the creditors give those labs until they expect a ROI?
    The financial underpinning the AI build out make zero sense, but we've seen the market remain irrational for long periods of time.
    keeda4 hours ago
    We have some idea about the demand. As a data point, the cloud hyperscalers have in aggregate 2.3T in backlogs or “Remaining Performance Obligations” — i.e. payments committed by customers for remaining services provided over the next few years — of which about ~1T is from OpenAI and Anthropic. That still leaves 1.3T from other customers.
    As another data point, these backlogs were at ~0.5T in 2022, before the AI boom started. Google for instance registered a 390% growth YoY in backlogs.
    That’s not too far from the trillions being invested in the buildout.
    I would say the irrationality of this buildout is exaggerated. It makes more sense to look at it as these companies making an existential bet on their futures.
    zamalek4 hours ago
    You don't address circular financing at all.
    keeda2 hours ago
    That's a fair consideration. I look at it two ways, rationalizing and data:
    Firstly, I would just ask, from a game theoretical perspective, why would these companies, all bitter competitors, most with very high fiscal discipline and absolute firehoses of double-digit billions of free cash flow per quarter pre-AI, actively do something that would be so destructive to themselves and the world economy?
    Secondly, there are a ton of sources indicating significant growth and revenue coming from outside the AI industry. A few references:
    1. The State of the AI Economy is the most thorough evaluation of deduplicated AI revenues I've found: https://www.exponentialview.co/p/the-state-of-the-ai-economy -- see especially the linked PDF report. I'm not a financial analyst, but they seem to cover all the bases. If nothing else, you should read this, it paints a very nuanced picture.
    2. Enterprise surveys:
    - https://knowledge.wharton.upenn.edu/special-report/2026-ai-a... (has links to reports from prior years, but enterprises)
    - https://menlovc.com/perspective/2026-the-state-of-enterprise... (Enterprise AI deployment spend up to 177B, 5x YoY)
    - https://a16z.com/state-of-markets-ii/
    - https://www.deloitte.com/us/en/what-we-do/capabilities/appli...
    3. Government surveys:
    - https://www.federalreserve.gov/econres/notes/feds-notes/moni...
    - https://www.genaiadoptiontracker.com/?tab=genAIwork&view=ove... - Toggle "Overall" and check the drop down for the variety of industries using GenAI; apparently 40% of "Agriculture, Forestry, Fishing, and Hunting" workers use GenAI. Also relevant: one tab over shows how much work hours they use AI for -- still only at ~5%.
    - https://ec.europa.eu/eurostat/statistics-explained/index.php...
    - https://www.oecd.org/en/about/news/announcements/2026/01/ai-...
    4. Payment processor data:
    - https://stripe.com/guides/indexing-the-ai-economy
    - https://ramp.com/data/ai-index (also here: https://fred.stlouisfed.org/blog/2026/10/which-businesses-ar...)
    This link mentions a bunch of the above and more: https://www.ryzlabs.com/guides/enterprise-ai-adoption-statis...
    There are many more of such sources out there, Google AI overview is pretty good at surface them.
    aleqs15 minutes ago
    Nah
  - lumost4 hours ago
    There is a big question on the ROI of those customers. It's clear that the frontier labs are delivering something people care about, but how much do the tier 2 labs deliver that people are paying for now?
  - tonoto4 hours ago
    Of course there's still a big demand as there are massive plans on building AI DC all over the planet, but at the same time this are supposedly not an anomaly - wouldn't most customers eventually want newer gear (or reduction in cost)?
  - PeterStuer4 hours ago
    At what price? I would have unlimited customers lined up selling dollars for 50ct.
- Analemma_5 hours ago
  Before Tuesday the plan was to get a bailout from their buddies in the White House on "national security" grounds. That became much less viable now that Trump is a lame duck and anti-datacenter ballot measures passed everywhere, which is probably why e.g. CoreWeave is down 20% since the election.
- Betelbuddy4 hours ago
  "UUUAAAAHHHH!!!"
  That was the sound of Ed Zitron ghost....
- dude2507115 hours ago
  Given the average bubble-prediction accuracy, there might as well be a few centuries before it bursts. Which would give some time.
neural_thing5 hours ago
This is a nothingburger. Microsoft declining to renew a deal for 2023 A100s that power Bing because they want newer chips in house.
Oracle can re-rent them at spot at a higher price anyway.
Apparently a lot of market participants are too scared to be able to read today.