@gabrielesvelto @spaetz

Exactly. Normally, these graphs are misleading because the price spiked for stupid reasons and, yes, it’s dropped, but it’s still above where it was before the stupid spike. This graph is misleading for the opposite reason.

They’ve taken on around £50 B of debt since the last time they were valued at this price. And that’s on top of their existing debt, which had been gradually growing for a few years. They currently owe £130 B, not including off-the-books bonds.

Their ability to service those debts is predicated on revenue from OpenAI, which is also facing a cash flow issue. They were planning an IPO, but members of their senior leadership team that need to sign off on the accounts to be submitted and face legal penalties for misleading investors are quitting instead of signing. Unless OpenAI either completes an additional funding round at close to the goal price for IPO (who would invest? You can just wait and buy at the same price at IPO with much less risk) or manages to both IPO and keep issuing new shares without tanking their stock price to generate additional cash, Oracle is going to struggle to service the loans.

The credit agencies know this. Their credit rating is now sitting one point above junk status. This means that future lenders expect that there’s a good chance that Oracle would default and so will charge high interest rates to compensate for this, which means loans are no longer available as a way of papering over cash flow shortfalls.

Oracle’s short-term future depends on how much Huang is willing to keep propping them up, and that depends on NVIDIA’s bubble price not collapsing.