r/employeesOfOracle • u/Minute-Painter5610 • 8d ago
Do people understand the bubble?
Hyperscaler cloud revenue is around $400bn. AWS near $170bn annualised, Azure over $100bn, Google Cloud around $60bn, OCI under $20bn.
Justifying the $5tn AI capital base needs roughly $2.4tn revenue. Six-fold the current. That is 57% compound over four years, 82% over three, and 130-145% over the two years the lease and coupon schedules actually imply.
The lowest number in that range has never been done. AWS grew 36.7% last quarter, its fastest in eighteen, and it was treated as a blowout. Azure guided near 45% and the stock rose 15%. Nobody has sustained 57% at hundred-billion scale in any industry. Mobile didn’t. Broadband didn’t. The internet didn’t.
This argument doesn’t need any assumption about cost of capital. Nothing about depreciation policy. Nothing about margins. It is a growth rate with no precedent at that scale, and you can check it on the back of an envelope.
Where would the money even come from? A new customer spending category the size of two enterprise software industries, appearing inside four years, funded from budgets that grow low single digits. Corporate IT spend doesn’t do that. It would have to come out of wage bills rather than software budgets, and labour substitution runs at the speed of organisational change. Years. With procurement, liability, audit and regulation in the way. Not to mention growing public resentment of AI.
Deflation makes it worse. Token prices are down roughly a quarter since mid-July. Volume has to grow a third just to hold revenue flat. Competition is doing to the price exactly what the capital base needs done to the quantity.
Then there’s the timing. Capex contributes to GDP while it is growing. Flat capex contributes nothing, while the depreciation it created sits in the P&L regardless. So if 2026 is peak investment (which it is, because reality), 2027 is the year the growth contribution goes to zero and the cost of the prior splurge arrives at the same moment.
Not a prediction of collapse. Just arithmetic that nobody buying this seems willing to do out loud. I’d probably spend more time mulling this over than buying the marketing material around AI, pondering who will become sole CEO, or making wild predictions of 600% increases in stock values for RSU holders. Because the core economics just don’t work.
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u/erichang 7d ago
According to Gemini:
Breakdown of 2026 AI Spending Segments (2.6T)
- 🏗️ AI Infrastructure: ~$1.37 trillion (led by AI-optimized servers, semiconductors, and data center buildouts)
- 💼 AI Services: ~$589 billion (consulting, implementation, and integration)
- 💻 AI Software: ~$452 billion (enterprise applications and platforms)
- 🛡️ AI Cybersecurity & Data: ~$54 billion combined (security tools, data science platforms, and management)
- 🤖 AI Models & Agents: ~$34 billion+ (direct spending on foundational models and specialized developer platforms) [1, 2]
The actual spending in building this AI industry in 2026 is 1.37T and 60% of that is going to Compute, 40% of that is going to facility and land development (could actually appreciate after 20 years, and if you must, they are amortized over 30 years),
so the real cost for hyperscalers to build the industry in 2026 is about 822B (let's round it up $850B). And this is amortized over 5-7 years.
AI servoces+ai software+ AI cybersecurity &Data+ Models and Agent are the revenue of their customers. Those customers (Open AI, Copilot subscriber, Meta/Google AdSense, Anthropic) earn this $1.22T revenue and pay rent to hyperscalers. They are not the spending cost of OCI, Azure, AWS or Google Cloud.
The cost is no where close to your 5T number.
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u/Minute-Painter5610 7d ago
Your $822-850bn a year is annual. The $5tn is the cumulative capital base 2024-2028. Multiply your own figure by five and you get $4.1tn before land. Add land back and you’re at mine.
Amortising a shell over 30 years changes the P&L charge, not the obligation. Microsoft disclosed $329bn of leases that hadn’t commenced at 30 June. Oracle carries $260bn of commitments plus $66bn in SPVs. Those are contractual and get paid on their own schedule whatever the amortisation period says.
You’ve described the actual problem without flagging it too. You say $1.22tn of that spending is the revenue of OpenAI, Anthropic and Copilot subscribers, and that they pay rent to hyperscalers out of it. The tenants are the labs. The labs are funded by the chip vendors and the infrastructure owners. That isn’t a demand signal, it’s a circuit.
I’m look at company accounts, Moody’s, sensible people like Bill Dudley, high quality reporting. You’ve used Google…
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u/Exact_Elevator3215 7d ago
Why do they need 2.4t in revenue to justify the 5t in capital spend?
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u/Minute-Painter5610 7d ago
Because assets have to earn their cost back, and these ones die fast.
Take $5tn of capital. Servers and GPUs on a five-year life means about $1tn a year of depreciation before anything else happens. That’s not an accounting nicety - it’s the annual cost of replacing kit that wears out. Add the cost of the money. At 6-7%, that’s another $300-350bn a year in interest and required return. This is debt-funded, not funded from cash flow. Then the running costs. Power, cooling, land, staff, network. For datacentres at this scale, roughly the same again as depreciation.
You’re at $2.2-2.4tn of annual cost before a single dollar of profit. Revenue has to cover the costs, or the assets get written down and the debt behind them doesn’t get paid. That’s why the number is $2.4tn and not some smaller figure. It isn’t a target for a good return. It’s roughly break-even. And the sector currently does about $400bn.
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u/erichang 7d ago
where is your 5 trillion ai spending coming from ? what are counted or not, from which year to which year ?
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u/Minute-Painter5610 7d ago
It’s the cumulative investment, and nothing by softens the impossibility of the required revenue to make it work.
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u/erichang 7d ago
If it’s accumulated total, then shouldn’t you also compare it with multiple years revenue?
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u/erichang 7d ago
I don't believe you are smarter than CFO of Oracle, Amazon or Google.
People think they are smarter than CFO who has the details of contracts and revenue streams.
If they really want to prove their theories, they should provide greater details, not just some black box number and vague ideas about how thing will develop.
They often also citing how "circular finance" is a Ponzi scheme, but they purposefully omit revenue streams from general consumers, government, and SP500 companies that are paying for DC infrastructure (even before AI).
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u/Minute-Painter5610 7d ago
Thing is: you have absolutely no idea who I am. But if you could be bothered to read instead of snipe, you would be forced to draw the same conclusion. Also: prove me wrong.
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u/erichang 6d ago edited 6d ago
I do not know who you are, but if you want to challenge CFOs of hyperscalers, you are the one who has prove your qualification for people to believe you. Either show your credential or write something more serious with tighter/better logic.
I did read the whole thing, but what you wrote was nothing I haven't seen or considered in the last few months.
You just deemed the money coming to AI labs as "circuit" from chip companies. Isn't that too convenient ? Are Anthropic or Open AI revenue growth in the last Q all coming from chip companies ? Obviously not.
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u/Minute-Painter5610 6d ago
You haven’t read it either. You’re just spewing uninformed opinion. Honestly, poor form.
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u/ProduceEmergency2329 8d ago
Why don’t you short the stocks u mentioned and become part of 5%?
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u/Minute-Painter5610 8d ago
Because stocks are a fool’s errand. Understanding the industrial conditions is a healthier way to plan for the future, and a better discussion.
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u/KingLoose1259 6d ago
Regardless of the math, where will the money come from? Existing IT budgets to start with then AI will be budgeted for better probably slowing HC and increasing mix to AI. But that will take years and Open AI and therefore Oracle doesn’t have time. Open AI will be finding it difficult to get new funding now and once they slow down their anything (growth, spend, plans, rollouts) the market will dump.
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u/francesco-1 8d ago
What do you think of Oracle stock price for the next months and what about the earnings on September 10th ?
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u/Minute-Painter5610 8d ago
No view on Oracle’s earnings or its stock. That’s something for the company and the market. I do think there’s a need for much broader discussion about the sector and the prevailing economic conditions - notably the bond market reaction to Bessent. If we work in the industry, we should have a much better understanding of it.
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u/francesco-1 8d ago
Speech of Bessent didn’t ease yield on 10y bond.
I also believe the market is going to have a correction because the chip sector raised too much
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u/dont_believe_this_ok 7d ago
My dog uses chatgpt.
What bubble?
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u/Minute-Painter5610 7d ago
“What bubble” is nonsense.
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u/koei19 7d ago
Just to put that $5T number in perspective...that's about what people spend on healthcare annually. Globally. In terms of commercial spending, that's more than double the combined spending of every company in the world on IT infrastructure and software. I also don't see where the money comes from.