Oracle’s stock price tanked after a new report on its profit margins, and there are serious possible implications for AI. Crypto’s market cap also declined afterward, but it’s hard to predict the full fallout.
LLM developers and various AI infrastructure interests are currently engaged in a huge wave of circular financing, but one collapse could cause more problems. The AI bubble may be in danger of popping soon.
Oracle Stock and AI Fortunes
Recently, Oracle Corp, an American database and AI cloud infrastructure firm, was enjoying a moment in the sun, with strong quarterly earnings and impressive stock performance. However, the company’s fortunes took a turn today, with its stock suddenly plummeting dramatically:
Oracle Corp Price Performance. Source: Google Finance
All told, this crash represented something like a $40 billion drop in the firm’s total market cap, a truly staggering figure. Oracle’s price dip also caused a corresponding decline in the total crypto market cap, so we have plenty of reasons to investigate this closely.
AI and crypto markets are thoroughly entangled in today’s environment, and further trouble at Oracle could rebound on this industry. Most social media chatter agrees that a new report from The Information caused this downturn.
Although the company puts out bullish financial data, a little scrutiny showed some serious underlying problems.
For one thing, Oracle apparently has razor-thin profit margins on its AI cloud services, profiting roughly 14 cents for every $1 in Nvidia server rentals. Sometimes, these tiny margins slip under viability, causing huge losses.
For example, in the last quarter, Oracle lost $100 million renting out Blackwell chips, which is theoretically a cornerstone of its AI business.
Is a Bigger Crash Coming?
In other words, the issue isn’t that Oracle can’t find sufficient buyers for its offerings; rather, AI infrastructure is apparently less profitable than advertised. Sure, many AI firms freely admit that they’re losing money, but this seems like more than a setback.
Will these platforms ever be profitable, even under ideal circumstances?
This problem is compounded by the rampant circular financing in today’s crypto industry. LLM developers make huge and influential investments into chip manufacturers, who in turn make major business deals.
Oracle is not the centerpiece of this AI investment web, but it’s certainly a major component:
Circular Financing in AI. Source: Anthony Restaino
In other words, the notion that AI is in a bubble is becoming commonly accepted, and an Oracle crash might be the thing to pop it. These companies are experiencing runaway investment and stock gains, but speculation alone won’t last forever.
Hopefully, the crypto market can avoid some of the fallout.
The post Oracle and Crypto Stocks Crash After Report on AI Profit Margins appeared first on BeInCrypto.
