Julie Chang (3:19)

In your story you mentioned so called sim farms. Can you tell us what they are and how they factor into the scam?

Bob McMillan (3:26)

They got to pump out all the spam. Right. And the best way to do that, it turns out, is to have a weird little server box installed on a mobile network. Like could be Verizon or AT&T that's just jam full with what are those little white cards you get when you get a new phone? SIM cards. And so each one of those cards represents a phone number. And they've actually built boxes that can just jam like 36 of those cards like into one server with a bunch of little antennas. So to the mobile carrier it looks like 36 individual telephones. But for the spammers, they can connect to these boxes from China and send out just a thousand text messages an hour. They're all over the country. I talked to one person at a large telco who said they've seen them in 49 out of 50 states. Sometimes people will rent rooms and just fill them with these SIM boxes. The Secret Service busted a bunch of them in New York recently. That was kind of a big story.

Julie Chang (4:21)

So just to clarify, the sim farms are here in the US but they're being operated by criminals in China?

Bob McMillan (4:27)

Yeah.

Julie Chang (4:27)

Okay. Do you have any advice for our listeners on how to avoid these scams?

Bob McMillan (4:31)

Anytime you're like on the Internet doing something that you didn't expect to be doing, with a sense of urgency, stop, take a breath and just use Google. Just go onto your personal computer and check your account, see what's going on. Don't trust your phone. That's my advice for just overall like to if you want to avoid these kind of scams.

Bell Lin (4:54)

That was WSJ reporter Bob McMillan speaking with our producer Julie Chang. Coming up, Oracle could be poised to be a big winner of the AI boom. But the full picture of its finances hasn't come into view yet. We'll dig into it after the break.

Sebastian Steinhauser (5:18)

How can leaders find opportunity in uncertainty? Here's Sebastian Steinhauser, chief operating officer of SAP, on how business businesses can build resilience in times of change.

Sebastian Steinhauser (5:28)

The greatest catalyst uncertainty can bring for growth is if companies unlock the disruptive power of uncertainty by creating more agility to their business. Because that to me is almost a source of competitive advantage in itself. The faster you can change, the faster you can adapt to uncertainty ahead of your competitors, the better you will perform.

Bell Lin (5:54)

Oracle is a nearly 50 year old company that's known for making databases, the kind of technology that seems more fit for corporate busy work than the next generation of tech. But the company's emerged in the last few years as a real contender in helping put together the building blocks of the new AI era, building data centers and buying up advanced AI chips to support it. Yet it hasn't all been smooth sailing. Oracle faces real questions over how it'll finance its AI infrastructure buildout. WSJ Heard on the street columnist Dan Gallagher joins us to discuss what's going on. So Dan, a goal of Oracle's financial analyst day last week was to answer some of the questions that analysts and investors have been asking about how they're going to backstop and support all of this AI infrastructure buildout. And there were also a lot of questions around the profitability of AI infrastructure overall. What do you think was the goal of Oracle's investor day?

Dan Gallagher (6:53)

They obviously wanted to put more meat on the bone essentially to help people understand. And so what happened is they gave even better growth numbers than they did in their call a month ago because they said in the last 30 days they've had even more business come in and they gave some breakdowns of the gross margins of various parts of their business. There were some reports a couple weeks ago about how the AI business, the margins are really, really low and they were trying to make the point that yes, they're low at the first because they get new chips in, all the expenses are front loaded, but they don't have full revenue coming in yet from that. And so they tried to give more color on that. The thing they did not do was give a sense of like what's going to happen spending wise, how much they're going to have to spend and what that's going to mean for the company's debt load. Are they going to sell more stock, have to raise a lot more debt? Because based on what they've projected for the revenue they have to service, they have to spend a lot because they have to light up a lot more data centers and a lot more capacity to power that revenue so they left a few key questions unanswered, even though they did give more details about the growth they're seeing.

Bell Lin (8:04)

So even with those unanswered questions, what was your overall impression of whether investors and analysts were sort of assuaged by what Oracle presented that day?

Dan Gallagher (8:13)

A lot of the analysts are very positive on Oracle because they see the growth numbers they're giving. And Oracle historically has been pretty conservatively managed. They're not typically been a company to like, make outlandish claims and not make them. And so there's essentially a lot of faith in Wall street that what the company is saying they can make happen. And they also have a very strong operating history of being very profitable. And so that's why some of these reports that they were almost giving away their AI business for free doesn't quite square up with how the company has long operated. But investors are starting to ask some harder questions now because we've seen over the past month or so all these Press releases from OpenAI, from Nvidia, from AMD, from all these companies about these outlandish huge numbers coming. And people are starting to say, well, wait, what's going to have to be spent to do that?

Bell Lin (9:04)

Speaking of OpenAI, we know that Oracle has a $300 billion deal with OpenAI which boosted its contract future revenue by a great deal. What is the risk of depending on OpenAI so hugely as a customer?

Dan Gallagher (9:19)

Because if OpenAI is going to actually pay that kind of revenue, OpenAI has to get a lot bigger than it is now. I mean, OpenAI right now is, according to reports, it's a privately held company, but reports are that it's going to generate around 13 billion a year in revenue at least this year. Sounds big. That's actually in the bottom half of the S&P 500. That's not even close to enough revenue to meet the obligations that have been implied by all these contracts they've been signing, not just with Oracle, but with Nvidia, AMD and everything. So there's a lot of hope hinged on this one company becoming much more massive. And then because Oracle is spending so much and is expected to actually burn cash over the next three years, which is something they've not done in the operating history that I've been able to find, ever. It's their biggest bet ever.

Bell Lin (10:09)

And along the lines of this being such a big bet for them, there are so many questions swirling over the fact that we may be in an AI bubble. And when I spoke to the new co CEOs and new dual CEOs of Oracle, they really weren't concerned. They really pointed to this idea that demand is far outstripping supply right now. And so providers like Oracle and pointing to a sort of bigger industry problem are coming in to fill that gap. And when there's demand, the supply will come and then the revenue will follow over the long term. So what's your take? Are we in a bubble and if so, what's the risk to Oracle if we are in such a bubble?

Dan Gallagher (10:45)

Yeah, there's a bubble going on. The bigger question is like who gets impacted by it? Where it gets seen. Is this purely an investment valuation bubble or an actual business bubble? There's a lot of differences between now and the dot com era. People are reducing this to like some more simplistic notions than really fits with Oracle. Again comes back to the fact that they are pretty closely hinged to this one customer getting really big. The difference with the dot com bubble is you had lots of fiber going in the ground that wasn't actually used. There's not a single GPU cluster that is not being used. Every time they get it in and installed, it's lit up. Not just Oracle, but its cloud competitors. So they're legitimately seeing a lot of demand from that side, but the customers that are paying for that eventually needing to start generating their own revenue with their own AI services. And that that's still a question may be answered. Is like how much revenue is going to happen in the next few years that they can be able to monetize them in a quick and rapid way or is it going to be more of a slow burn thing? And right now stocks are priced for this happening very rapidly and if it happens, but happens more slowly, then that's when you'll see the effects of like is this a bubble that's going to burst or whatever?

Bell Lin (11:57)

That was WSJ heard on the street columnist Dan Gallagher. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with Deputy Editor Chris Sinsley logging off. I'm Bell Lin for the Wall Street Journal. We'll be back later this morning with TNB Tech Minute. Thanks for listening.

Sebastian Steinhauser (12:21)

Uncertainty is inevitable, but it doesn't have to hold your business back. Here's Sebastian Steinhauser of SAP again on how companies can adapt to the unpredictable and thrive.

Sebastian Steinhauser (12:31)

Technology is the greatest tool in your tool set to help you create that capability to train that muscle in your enterprise to adapt fast to change in the environment. And that's where customers are turning to SAP now. To say, hey SAP, you already run our most mission critical processes in our enterprise. Help us apply generative AI agentic AI. Apply this disruptive technology to improve our agility when it comes to making fast decisions for our business in a very uncertain economic environment.

Sebastian Steinhauser (13:08)

Learn more about how SAP helps businesses conquer uncertainty@SAP.com Uncertainty Custom content from WSJ.

Dan Gallagher (13:15)

Is a unit of the Wall Street Journal Advertising Department. The Wall Street Journal News Organization was not involved in the creation of this content.