Becoming a bank ...

President Trump with Masayoshi Son, the chief executive of SoftBank, and Larry Ellison and Sam Altman after announcing Project Stargate on Jan. 21, 2025.Credit...Haiyun Jiang/The New York Times

The pix says it all. Masayoshi Son helping Trump to walk, Ellison looking like the living dead and Altman,
a mere afterthought, comes to mind as Oracle is tanking as we speak regarding the vagaries of
AI and the ongoing reality of never ending debt.

On Jan. 21, 2025 — the first full day of the second Trump administration — Larry Ellison woke up in his 33-bedroom, 34-bathroom oceanfront mansion in Florida, got into his Gulfstream jet and headed up to Washington. Ellison, who was 80 and worth in the neighborhood of $200 billion, had an appointment at the White House. He didn’t bother to take a driver’s license — he needed to call someone on the president’s staff to vouch for him at the gate — but there he was, at 2 p.m., standing beside Donald Trump in the Roosevelt Room as the president announced “the largest A.I. infrastructure project by far in history” and told the world that his friend Larry Ellison was just the man to get it done. “He’s sort of C.E.O. of everything,” Trump said. “He’s an amazing man and an amazing businessperson.”

Ellison began by thanking Trump. “We certainly couldn’t do this without you,” he said. “It would simply be impossible.” He then proceeded to sketch out the ambitious plan. Ellison’s database software and cloud computing company, Oracle, and its partners — most prominently OpenAI — were going to invest as much as $500 billion over the next four years into a group of sprawling data centers, 500,000 square feet each, that would produce 10 gigawatts of computing power, using enough energy to power as many as 10 million homes. It was called Project Stargate, after the 1994 sci-fi movie in which Kurt Russell steps through a wormhole and finds himself inside a pyramid on an alien planet. This Stargate would be a portal leading humanity from the postindustrial era to the artificial-intelligence age.

Ellison did cash in, at least at first. He signed the Stargate deal with Altman, putting him in business with the hottest young executive in the A.I. industry. He opened one of the world’s largest data centers in Malaysia, which has provided by one estimate more than one-fifth of China’s A.I. computing power, and developed plans to build another one in the United Arab Emirates.

But his big bet on A.I. was built on an astronomical amount of debt in every imaginable form — bonds, letters of credit, asset-backed securities — available in seemingly unlimited quantities, because the more you spent building A.I. infrastructure, the more you would earn, or so the logic went. Computer theorists called it the scaling hypothesis. It held that advancements in A.I. were directly tied to the generation of unprecedented amounts of computing power to process unprecedented volumes of data. Reaching the holy grail of artificial general intelligence, or A.G.I., when computers match or surpass human thinking at any task, was going to require bigger data centers and a lot more of them. It all came down to capital expenditures — capex, in the lingo of the Valley. Whoever controlled the most computing power would control the A.I. economy.

Brendan McDermid/Reuters

A year and a half after his triumphant trip to the White House,
Ellison may be poised to become something else: a cautionary tale.

Ellison is personally worth about $55 billion less than he was on the morning he flew to Washington, and more than $200 billion less than he was at his peak in September. Oracle has pushed the limits of the credit market and is facing steeper interest rates from lenders, and its credit rating has been downgraded to a notch above “junk” status.

The hyperscalers — Alphabet, Amazon, Meta, Microsoft, Oracle — are some of the richest companies in the world, and the stock market is heavily dependent on them for its growth. If Oracle were to falter, the repercussions could be wide-ranging. Americans are more invested in the stock market than ever before, and the A.I. boom has been driving a disproportionate amount of America’s economic growth. Last fall, Gita Gopinath, a former chief economist at the International Monetary Fund, writing in The Economist, estimated that an A.I. crash would wipe out $20 trillion in American wealth — far more than the dot-com crash in 2000 or even the 2008 financial crisis.

In closing ...

Oracle has ceased to be a technology licenser; it mutated into a law firm and a bank. Specifically, a subprime lender for un-renderable technology. Bankrolling OpenAI and chasing the scaling hypothesis is actively killing Ellison's company. Nothing personal, but crocodile tears apply. Remember, as per MIT, 95% of all AI projects fail.
The bubble is beginning to burst in real time.