Oracle Corporation (ORCL)

So the lens of huge greenfield opportunity + how much investment risk are the hyperscalers willing to take on to capture that opportunity explains much of the changes happening in the cloud market.

But it doesn’t fully explain the last update I haven’t discussed: Oracle’s MASSIVE RPO backlog and commitment from OpenAI.

And they’re dipping into the honeypot of leverage to get into the AI CapEx game. From Doug O’Laughlin:

> There is no way for Oracle to pay for this with cash flow. They must raise equity or debt to fund their ambitions. Until now, the AI infrastructure boom has been almost entirely self-funded by the cash flows of a select few hyperscalers. Oracle has broken the pattern. It is willing to leverage up to hundreds of billions to seize a share.

So why are they willing to do this when others aren’t?

My interpretation is this: the other hyperscalers are making their best guess expected value calculation while Oracle has an expected utility calculation they’re making. [...]

Whether or not Amazon, Google, and Microsoft lever up to invest even more in this boom, there’s no additional utility for them. They’ll still be one of the big three cloud vendors.

But Oracle, by taking the additional risk with leverage, DOES get expected utility from this. They can move from being a distant fourth-place cloud vendor, to becoming one of the “big four” cloud vendors.

So when you ask Larry Ellison if he’d rather play it safe and stay where they’re at, or make the bet others aren’t if the result is a state change in how Oracle is viewed, he’ll take that bet every time.