00:00flagship AI data center the financing the idea that it can be sort of self-sustaining. What is your degree
00:07of confidence there.
00:09Yeah I'm mixed on that and that's why I have a sector sector perform on Oracle because you know I
00:15think two things right.
00:16Number one is what is their ability to actually build this out in the timeline to meet the demands. And
00:20you know if maybe they can
00:22benefit from excess capacity tailwinds from from others if opening eyes and there to meet the demand. But can they
00:27really get all that
00:28money and finance it. And then what do the actual margins on that look like. I think to make the
00:32assumption to get to a self-financing
00:34state you probably have to have them hit that 30 to 40 percent cloud AI infrastructure gross margin that they
00:40gave us at the analyst day
00:41sooner than later. Right. And that could be actually a longer ramp to get there. So I think that's where
00:46I'm still on the sidelines on
00:47on just the ability to do that without needing any financing or without having to cut elsewhere in other parts
00:53of the business even further than
00:54they've already been doing. And of course Rishi you are in equity research. But I wonder you know how closely
01:00you're
01:00monitoring what's going on with the corporate credit side of things when it comes to a name like Oracle. As
01:06we were
01:06mentioning just a couple of minutes ago you think about their five year CDS recently touching the highest level since
01:12January 2009 in your work analyzing the stock. I mean how do you what sort of takeaways are you gleaning
01:20there.
01:21Yeah no absolutely okay. I mean even if I'm an equity analyst it is something that I pay very close
01:25attention to. I think we all have to and say what signals is this telling us that might be missing
01:29right. And it's showing about confidence in raising. And I think as I even build up my model I have
01:35to
01:35start thinking about well what does this actually do to the bottom line right. Because it matters at the
01:40end of the day it's not just all about revenue growth. And you know if they're going to have to
01:43pay higher
01:44interest rates and take on greater amounts of debt you know that's going to be a knock against their bottom
01:50line right. They're going to start paying cash interest. They're going to you know start carrying those
01:53that was to this valuation. So it is it is still hinting to us that that there is a lack
01:57of confidence in
01:58their ability or the market's ability ability to really just continue raising capital and actually have these fully
02:05funded out and that they will be able to meet the long term targets that they gave us at the
02:10analyst day. I am curious so
02:11too just about the idea of how much confidence you have in their discipline to do that. I mean this
02:15company has gone
02:16through cycles like this before. And with regards to the management and their ability to sort of manage those
02:21financial issues. Do you think they're going to have the discipline to do it. Look I think the answer to
02:26that is
02:26yes right. I think Oracle has committed to having OCI be the infrastructure for powering LLMs and for the
02:34scaled AI developments and for Stargate. And you know I think they're kind of they have a lot of levers
02:39they can pull out. You've seen
02:40them already do equity raising after you know there was concerns that they might not actually be willing to do
02:45that.
02:45You've heard discussions about potential further layoffs in the business. So I think they are
02:50committed to this. I think they will to whatever tools they have in their arsenal to be able to meet
02:54that demand and basically be able to tell that narrative that this is that next gen scaled out AI
03:01infrastructure. And if AI is here to stay which you know I think most of us believe it is that
03:05they can
03:06be that you know AI cloud to power the next five ten years. So I think they're very committed to
03:11driving that
03:11narrative.
03:11I think they're very committed to driving that narrative.
03:12And if you want to review it.
03:12You're a very committed person and you haven't got to see it.
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