Oracle Shares slipped 5% on Tuesday after reports from information that raised questions about the company’s plans to buy billions of Nvidia chips to rent to clients like OpenAI as cloud providers.
Oracle had a gross profit margin of 14% on Nvidia Cloud Business’s $900 million in revenue for the three months ended in August, according to a report citing internal documents. This is significantly lower than Oracle’s overall gross profit margin than about 70%.
The report stated that Oracle’s transformation into one of its most important cloud and artificial intelligence companies could encounter profitability challenges, with how expensive Nvidia chips are and aggressive pricing for AI chip rentals.
In September, Oracle said the backlog of cloud contracts, known as the remaining performance obligation, increased by 359% in a year. It forecasts $144 billion in cloud infrastructure revenue, exceeding $100 billion in 2030.
Much of its projected revenue comes from Oracle’s role in the Stargate project, and enterprise vendors are working with Openai to open five large data centers filled with Nvidia’s AI chips.
Oracle’s annual stock chart.
