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The rapid expansion of artificial intelligence is creating major opportunities while also exposing companies to significant financial risks, The New York Times reports.
Larry Ellison and his son are using Oracle-generated wealth to expand into media, with control of Paramount and a potential takeover bid for Warner Bros. Discovery. Meanwhile, Oracle is facing financial pressure because of the enormous costs of building AI infrastructure, leading to a debt downgrade and a major decline in Ellison’s holdings.
Major technology companies, including Oracle, Microsoft, Alphabet, Amazon and Meta, are investing hundreds of billions of dollars in AI data centers. While these investments are supporting economic growth, spending is increasingly exceeding free cash flow, forcing companies to rely more heavily on debt. Investors are questioning whether future AI profits will justify the scale of these investments.
Oracle is especially vulnerable because its AI growth depends heavily on customers such as OpenAI and other startups that rely on outside funding. If AI returns fall short or borrowing costs rise, heavily invested companies may struggle. Similar patterns occurred during past investment booms, including railroads and the dot-com era, where new technologies created both successful companies and major failures.
AI is likely to transform many industries, but massive investment does not guarantee success.
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