Oracle's Force Majeure

Tim Stenovec (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Carol Massar (0:08)

You're listening to Bloomberg Businessweek with Carol Massar and Tim Stenovec on Bloomberg Radio.

Tim Stenovec (0:15)

Hey, keep an eye on shares of Akamai because it is up about 17.5% here in the aftermarket. Yeah, that's why we need to just talk about it a little bit because Anthropic has signed an $11.6 billion seven-year contract with Akamai Technologies for computing power, adding to the AI developers' growing list of data center deals. I think what's interesting is Akamai is going to supply Anthropic access to central processing units. We're talking about CPUs, has issued a warrant that gives Anthropic the right to buy Series B shares that converts it to common stock. Talk about quite a deal, and the contract represents the largest deal in Akamai's history with the company estimating that its CAPEX spending, its capital spending tied to this one agreement will total about $5.5 billion.

Tim Stenovec (1:03)

Fortunately.

Tim Stenovec (1:04)

Talk about something that might be-

Tim Stenovec (1:05)

Fortunately, Anurag Rana is here.

Tim Stenovec (1:08)

Yay.

Tim Stenovec (1:09)

He's Bloomberg Intelligence Senior Technology Analyst for Bloomberg Intelligence, as I mentioned. I got his research on the terminal.

He joins us from our Chicago Bureau. Anurag, remind everybody where Akamai Technology plays in the AI infrastructure world.

Anurag Rana (1:28)

Actually, I wasn't even sure they were playing in that world, because before that, I thought they were doing something else.

Tim Stenovec (1:33)

Well, I know them from the Netflix days, many years ago.

Anurag Rana (1:36)

I know.

But it seems like if you have free data center capacity, you can go out and sell it to others. Maybe I'll go see if I have computing capacity at home. I can sell it to any of these frontier labs as well.

Tim Stenovec (1:51)

So the story is about all of these companies going and trying to find capacity wherever they can. And Akamai has that capacity.

Anurag Rana (2:00)

That's what I see. To be honest with you, before I was coming here, I didn't even know this thing was existing, frankly, that these guys do this business. But that's not what it looks like right now. That if you are looking for any way to make money, GPU pricing is so high that this may be a good business for everybody to get in, not just CPU, but CPU pricing as well, obviously.

Tim Stenovec (2:20)

You know, I'm looking at the FA page for Akamai. And so they had 4.2 billion revenue in 2025, $11.6 billion seven-year contract with Akamai, signed by Anthropic. They're going to spend some 5.5 billion, it says, in CapEx. How does this kind of change? I know it's early, we're throwing this at you, just as it's been crossing. But does it change the balance sheet a lot for this company?

Anurag Rana (2:44)

Well, a lot depends on it. So the question is, when you look at something like this, what we are here to talk originally about Oracle, but these deals, when you look at it, are structured on a particular contract that they got. So it's possible when you are looking at a specific contract with a specific provider, you will have some backstops as well, whether from the chip provider, whether it's Nvidia or somebody else. So the question really is, when they go out in the market to look at debt for that, what kind of covenants would be, what kind of backing there is. So there is a lot of ifs and buts, but all of these deals need to be financed one way or the other.

Tim Stenovec (3:25)

Can I just ask you though, is it another sign of circular financing? Because this story, the whole idea, you've also got Akamai said part of the warrant issued to Anthropic represents about 2 percent of Akamai's common stock, and it gives an opportunity for Anthropic to invest in this company. Again, it's very close.

Anurag Rana (3:44)

Yeah. But the thing is, think about it this way. When you are a Frontier Lab, and you're doing some really high-end work, and you need more capacity, you are not getting it anywhere. I mean, you are tapped out of any of the larger hyperscalers. You've already done what you can with them.

You go and find it for the Neo Clouds. After that, you just keep on going and trying to find wherever you can. And one of the biggest complaints I think Sam Altman has had against Anthropic has been that they haven't had enough computing capacity. Now, the Anthropic side would be, well, we go out and get capacity when we need it, depending on the demand. So I think there's a lot of that happening here. So I personally am not in that circular financing camp only because the demand is coming from customers. You're not manufacturing demand on the fly here.