Oracle gained 2.4% on Tuesday, with favourable early assessments of OpenAI’s ChatGPT-6 Astra drawing investor attention to the companies’ commercial relationship.
OpenAI’s commitment to Oracle covers $300 billion of computing capacity over five years under a contract signed in September last year. Investors see Oracle’s prospects as closely linked to OpenAI’s success, connecting confidence in the computing supplier with the reception of its customer’s products.
The purchasing commitment sits alongside concerns about Oracle’s capital expenditure, including investment in data centers. Investors are also concerned about profitability and the company’s ability to finance obligations under contracts that cannot be canceled. The financial question extends beyond demand for computing capacity to the spending and funding required to provide it.
Oracle’s quarterly results are due on Thursday. Several analysts anticipate a substantial increase in cloud revenue, while the scale of the company’s spending remains a concern.
Morningstar analyst Luke Young believes Astra’s performance strengthens investor confidence in Oracle’s OpenAI-related order backlog. That backlog represents commitments that have not yet been recognized as revenue, making the distinction between contracted business and revenue relevant to the financial outlook.
OpenAI introduced ChatGPT-6 Astra last week. The model is currently available to a limited group of users, with positive reactions coming from both users and technology experts.
Young sees potential for Astra’s capabilities to expand the work performed using OpenAI’s technology. In his assessment, its ability to operate a computer fully could support new uses and complete workflows that previous models could not handle. He believes that progress could increase demand for computing capacity and support Oracle’s share price.
The potential demand increase remains Young’s assessment. Oracle’s existing commercial exposure is already substantial through the OpenAI contract, while investors’ concerns cover the cost of infrastructure, profitability and financing commitments.
Thursday’s results will put cloud-revenue growth and spending back in focus. If the additional computing demand envisaged by Young materialises, it would sit alongside the capital expenditure and contractual financing obligations already concerning Oracle investors.
