Oracle’s success will be directly tied to OpenAI’s financial strength, says Jefferies’ Brent Thill

Frank Holland (Host) 00:00.070

for that story let's bring in brent thill the research analyst over at jeffries covers many of these big hyperscaler type names brent earlier this hour we spoke with apollo global chief economist torsten slack and he flagged specifically hyperscale issuance debt issuance as one

Frank Holland (Host) 00:15.990

of the concerns that he has for this coming year just how big of a deal is it for oracle and these other big mega cap tech companies to finance their AI ambitions

Brent Thill (Analyst) 00:26.580

yeah it's a it's a big deal it's the number one overhang as we've said we're moving from an era of AI hype to an era of AI show me so can you produce the revenue can you produce the actual infrastructure and it's obviously going to require a lot of capital oracle is highlighted

Brent Thill (Analyst) 00:43.980

that their margins go down the capital requirements go up capex goes up and this is all dependent really on open AI success so the success of oracle is going to be directly linked to how well financials are and there hasn't been really a great degree of clarity given by oracle

Brent Thill (Analyst) 01:03.510

about how this is going to get done other than they feel very confident in open the eyes capabilities to to do this so our our perspective is they're going to be a couple leaders obviously open AI and or google gemini right now are leading and so our belief is that open AI will

Brent Thill (Analyst) 01:21.910

be able to make do on this commitment there's direct signs they're moving harder into the enterprise away from the consumer market itself how do you monetize this you sell it to large enterprises and they've made several initiatives at open AI to to run that enterprise business

Brent Thill (Analyst) 01:36.630

which could be absolutely enormous and that's going to potentially be a big big avenue of of funding as they build that business out so long

David Faber (Host) 01:46.710

term brain i'm sorry to interrupt because i but i i think you are hitting on maybe the most important market story going right now and that is open AI open AI is a private company so we don't know a lot about the books we have open AI run by sam altman who periodically shows up

David Faber (Host) 02:05.630

kind of mussy hair and he'll be like i'm going to give away ten gigawatts of energy the CFO has had a couple jobs prior to this one there's a lot of people i know in the valley that are just worried about select open AI because not because of the company but just because it's

David Faber (Host) 02:18.670

private they don't know and how much of the oracle and AI story is effectively this you've got a rich uncle that you know is rich but you're not really sure how rich kind of secretive uncle that's open AI and they say don't worry buy a home brent i'm going to pay for it i've got

David Faber (Host) 02:35.870

you covered so you buy a house you better darn well hope that that rich uncle comes through on their commitments that rich uncle is open AI do you worry about them at all

Brent Thill (Analyst) 02:50.260

we worry that we're not as worried because of the quality of the team that they're assembling so let me give you an example they just hired denise dresser to run enterprise sales they didn't have a real great go to market leader she's run many companies in the past including

Brent Thill (Analyst) 03:06.020

salesforce for thirteen fourteen years and ben benioff 's kind of right hand and helping run many initiatives so you know when they're adding the rich uncles adding new people like this to the family you you get more confident that they're on right track i think secondarily when

Brent Thill (Analyst) 03:22.150

you look at there's only a few in AI that win right so this isn't a twenty vendors win this is three win look at what happened with google look at what happened with microsoft look at what happened in any past cycles there's number one vendor gets sixty seventy percent of the

Brent Thill (Analyst) 03:36.870

market share and right now it's it's basically open AI anthropic and and and google and and a couple others there's not there's not like a laundry list of many names so we we have a little more confidence that that rich goal is is good for it because of the the the rules of AI

Brent Thill (Analyst) 03:54.110

which is you need capital you need users you need data and open AI has those things and then they haven't even cracked the code in the enterprise i think that's the twenty six twenty seven story where big companies like our firm other firms start paying open AI a lot of money

Brent Thill (Analyst) 04:09.910

for their service so again yeah there's a lot that's contingent upon what happens at open AI and it's hard to your point it it is really hard and i think that's why oracle stock is is trading now half you know literally if they get to twenty dollars of earnings power which is

Brent Thill (Analyst) 04:26.190

their target and you put a twenty multiple on it which is not aggressive that's four hundred dollars it's half that half that multiple right now