Oracle, Meta in Talks Over $20B AI Cloud Deal

TL;DR Breakdown

Oracle is in talks with Meta on a $20B multiyear cloud deal.
Shares of Oracle surged 84% this year, with its cloud unit projected to top $500B in booked revenue.
Moody’s warned of risks from heavy reliance on a few AI clients.

Oracle Corp. is reportedly negotiating a multiyear cloud computing deal with Meta Platforms Inc. According to people familiar with the matter, the deal is valued at around $20 billion. If finalized, the contract would add to Oracle’s growing reputation as a key provider of computing power for AI workloads. It recently made massive commitments with OpenAI, too.

Companies like Meta and OpenAI require vast computational resources, and Oracle is positioning itself as a critical partner. By supplying cloud capacity tailored to advanced AI training and deployment, it is competing with Amazon Web Services, Microsoft Azure, and Google Cloud.

The company’s shares have already jumped 84% this year, thanks to a string of cloud wins. Oracle’s share price is up by more than 31% over the past month. It is trading at an average price of $308.66 at the press time. Meta’s share price performance has been marginal lately. Meta price is up by around 3.5% over the past month, while it is still up by 33% over the last 6 months. It is trading at an average price of $778.38 at the press time.

Moody’s Flags Risks in Oracle’s AI Mega-Deals

Earlier this year, Oracle stunned the market with a massive $300B AI cloud deal with OpenAI. It reportedly promises 4.5 gigawatts of compute power. That’s the kind of number that makes tech investors do a double-take. The Wall Street Journal reported that OpenAI’s deal alone could account for a majority of Oracle’s projected booked revenue. The company estimates will surpass $500 billion in its cloud infrastructure division.

Elon Musk briefly lost his world’s richest title to Oracle co-founder Larry Ellison, whose net worth jumped $101 billion after a blowout earnings report. But Ellison’s reign was short-lived as he lost $34 billion days later, while Musk’s fortune surged $35 billion. Musk regained his spot amid doubts over Oracle’s OpenAI deal.

This comes in when the US credit rating agency Moody’s has highlighted potential risks in Oracle’s recent AI contracts. It pointed out the counterparty risk from dependence on a small number of clients. However, Moody’s stopped short of taking action, although it revised Oracle’s credit rating outlook from stable to negative in July. Analysts noted that while these deals give out the “tremendous potential” of Oracle’s AI infrastructure business.

With back-to-back positive AI partnership announcements, AI tokens seem to be getting their rhythm back. The biggest AI and data tokens’ category surged by 4% over the last 24 hours. CoinMarketCap shows that its cumulative market cap hovers around $36.7 billion. Near Protocol price jumped by 13% in the last 7 days. It is trading at an average price of $3.16 at the press time.