11AM Hour: Oracle Shares Tumble, Former Kansas City Fed President on Inflation & Counting Down to the SpaceX IPO 6/11/26

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Alex Sherman (0:39)

And I think it's a great place to start.

SPEAKER_2 (0:41)

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SPEAKER_5 (0:42)

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SPEAKER_2 (0:44)

So let's go to Venture Global. Venture Global is a great place to start. So let's go to Venture Global. Venture Global is a great place to start. So let's go to Venture Global. Venture Global is a great place to start.

Jeff Bezos (0:53)

So let's go to Venture Global.

SPEAKER_2 (0:54)

Venture Global is a great place to start.

Jeff Bezos (1:03)

People thought we were building robots and doing world models and things like this, which isn't correct. And so there's been some speculation. We thought, look, we're not being secretive. We're just being heads down and trying to do the work. But there's a certain amount, when you raise this much money, people do get curious.

If you let that just be a complete void, they'll fill it with nonsense. So we figured we'd at least say what we're actually working on.

Carl Quintanilla (1:29)

Amazon's founder and executive chair, Jeff Bezos, with our David Faber last hour, his new AI startup Prometheus raises $12 billion.

Good Thursday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Leslie Picker here at Post 9 of the New York Stock Exchange. Sara Eisen is off today. The rising need for AI compute, Bezos tells David they have enough, plus his thoughts on the AI jobs impact and government regulation. We'll get to the highlights.

Leslie Picker (1:52)

Iran threatening the Musk economy, reportedly now treating Elon Musk's companies in the Middle East as military targets just a day before. SpaceX makes its big public market debut here in the US.

Carl Quintanilla (2:05)

A costly AI build out, Oracle saying it would invest 70 billion in the coming year to finance its data center plans. Shares are lower today, close to session lows here, as investors scrutinize its spending, sustainability and rising debt load. As for markets, trying to hang on to gains here. S&P just went red, break even for the week. We're watching also Tuesday's low, which would put you around 72.37. We're still about 30 points above that. Also the Dow trying to hang on to gain of 175

Leslie Picker (2:34)

Let's get more on this Oracle move with Seema Modi. Seema.

Seema Modi (2:37)

This is the biggest move we've seen in Oracle shares in six months, Leslie. Oracle's demand story, that huge increase in its backlog in the quarter, being overshadowed by the increasing cost of the AI buildout and Oracle's plan now to raise $40 billion in debt and equity in 2027

Goldman Sachs says it's reinforcing concerns around the duration and funding of the AI buildout. For context, this is the second time Oracle has announced an equity issuance to fund its data center expansion. It's what consumed much of the earnings call last night with its new chief financial officer, Hilary Dixon, fielding many questions on how she views CapEx, Oracle's balance sheet evolving over time. Deutsche Bank's takeaway is that Oracle will see negative free cash flow for the next several years. Others on the street more optimistic, actually raising their price targets. The silver lining here is that Oracle's novel approach of giving customers the option to bring their own hardware and GPUs to their data centers at their building, is actually helping reduce spending needs by billions of dollars in the past quarter. Guys, the challenge now is ensuring data center commitments remain on time and that its relationship with its main customer, OpenAI, continues to enhance these new opportunities. Because the sense I got from the call is that there is no indication Oracle is slowing down its push into AI infrastructure, hence this need to raise more capital.

Leslie Picker (3:53)

Seema, how should we be thinking about this Wall Street Journal report about OpenAI, considering what they call drastic price cuts amid this capex build out that we're seeing from Oracle?

Seema Modi (4:05)

Sure. I think it tells us that pricing dynamics remain fluctuating for the coming quarters and it tells us that given the large increase in compute, a lot of the AI labs need to think about their pricing model. But now, I think the read-through for Oracle is that they may also need to get a bit smarter about how they're viewing their future deals that they have and not just OpenAI but other customers because this is a company that is trying to diversify its pipeline beyond OpenAI. There's Meta, Elon Musk's XAI among other customers. But this is going to be a key topic going forward. Now, as to what it means for the stock, which is now down 11%, Leslie, the company is in a unique position in comparison to some of the other hyperscalers. It was a traditional software company about 36 months ago but then made this huge pivot into data infrastructure. It needs a data infrastructure bet to pay off in order to make it immune from those SaaS apocalypse fears. So that's why it's caught up in this interesting dynamic and why I think it's reinforcing the need to spend more.