The Blind Oracle: Technology giant Oracle is mired in billions of dollars in debt
The financial condition of the American technology giant Oracle is rapidly deteriorating: its debts exceed $ 110 billion. In order to avoid bankruptcy and "meet the demand of contract customers," the corporation's management decided to start issuing securities. The situation with American startups in the field of artificial intelligence is heating up the situation all over the world, experts predict a global crisis in the event of a bubble collapse. Izvestia has figured out why there is a growing concern about AI developments in the United States and what will happen as new technologies develop.
Oracle, the largest technology corporation in the USA, is on the verge of bankruptcy: what is known
The American technology giant Oracle is going to raise $45-50 billion by placing new shares and issuing bonds. The company plans to spend these funds on creating new facilities that are needed to "meet the contractual demand of its largest customers." Oracle's partners are huge corporations involved in AI development in one way or another. These are key electronics manufacturers Nvidia and AMD for the industry, the developer of the ChatGPT neural network — OpenAI, as well as TikTok and Elon Musk's xAI. Despite the company's statements, some experts suggest: this is another step to avoid bankruptcy.
The new year started very successfully for Oracle: the company received a 15% stake in TikTok's American assets, after the announcement of the creation of TikTok USDS Joint Venture LLC in the United States. However, the deal did not save the IT giant from a rapid deterioration in its financial situation. Oracle is currently actively building data centers in the United States, and its debts already exceed $110 billion.
Bloomberg reported that OpenA I, one of the largest research organizations in the field of artificial intelligence, has to pay $300 billion to Oracle as part of a partnership deal, but cannot do so due to billions of quarterly losses. The tech giant's shares have already declined by 50% since their peak in September, losing a market value of about $460 billion, and may fall even further after the securities offering — there is a possibility that the market will not be interested in them, according to an analyst interviewed by Bloomberg.
The difficult financial situation forces Oracle to look for alternative sources of income. For example, the company wants to raise $8-10 billion from the dismissal of 20-30 thousand employees, as well as curtail multimillion-dollar purchases of Nvidia graphics cards.
Malek Dudakov, an American political scientist, told Izvestia that if Oracle fails to raise enough funds, the AI industry may collapse in the United States, which will inevitably be followed by a crisis.
— If the investment does not recover, Oracle may be on the verge of bankruptcy. In this case, we can expect a repeat of the September 2008 scenario, when the American investment bank Lehman Brothers collapsed. This triggered the transition of the domestic mortgage crisis into a global one," the expert explained.
Back to the Future
US President Donald Trump has been trying to promote the idea of AI startups in America for a long time. It takes a lot of money to build data centers, despite the fact that they will only begin to pay off decades later. For example, in September, OpenAI announced plans to build five new AI data centers in the United States in collaboration with Oracle and SoftBank as part of the Stargate project.
Donald Trump
Recently, at the World Economic Forum in Davos, Donald Trump said that the United States is leading in the development of artificial intelligence and is creating more energy capacity than any other country. "We are significantly ahead of the rest of the world in the field of artificial intelligence. We are significantly ahead of China. I think the president (of China. — Izvestia) Xi (Jinping. — Izvestia) respects what we have achieved, partly because I have allowed these large companies building these huge buildings to create their own power plants. They are building their own power plants, the total capacity of which exceeds that of any other country in the world," Trump said.
Analysts believe that the American president's policy in the field of AI is justified by his desire to help the United States transition to a "new technological order." It is believed that this is one of the most effective ways to solve the traditional problems of crisis-free development of the state's economy, which is why huge budgets are invested here. However, Vladimir Vasiliev, chief researcher at the Institute of the USA and Canada, shared with Izvestia the opinion that such actions could leave other equally important industries in the United States without funding, and this would entail much more negative consequences.
— Many points indicate that a huge "bubble" is inflating, which can cause very serious damage to the American economy. Many industries remain without investments: mechanical engineering, mining, and the service sector. This interferes with their normal operation. <...> Today, artificial intelligence is creating a one—factor economy based entirely on capital," the expert said.
Trends in the development of AI in the USA
Experts predict that the collapse of the artificial intelligence bubble will inevitably lead to negative consequences not only for the US economy. This effect will spread to the global financial market. AI is now a driver of the growth of the American economy, where trillions of dollars are invested. If the development of the bubble stops or stops, the United States will face periods of recession and stagnation.
Malek Dudakov argues that artificial intelligence in the United States has now grown to an extreme point. If this "bubble" continues to develop, the American economy will face significant losses. However, the future of AI, in the case of controlled growth and artificial suppression, may provide researchers with new opportunities to study it.
— In this case, Wall Street banks will start having difficulties, which reduce investments in data centers, because they do not pay off. There are also already problems with the construction of new data centers in the United States. The cost of electricity is rising, so Americans are demanding that their creation be stopped. <...> The most important thing is for the hype to subside: many AI startups must go bankrupt or collapse. Only then will it be possible to properly explore the possibilities of artificial intelligence. Algorithms will not disappear: they will develop naturally, and not within the framework of the "mania" that manifests itself in the markets, the expert stated.
In turn, Vladimir Vasiliev added that the development of artificial intelligence in the United States is also aimed at replacing the "living" workforce with a machine that will do all the work.
— The revolution of artificial intelligence may indeed lead to a sharp decrease in the number of real workers. First, artificial intelligence systems that will replace white—collar workers, then people employed in industry, and later— management personnel. The role of live labor is likely to be minimized," the expert concluded.
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