# Oracle's fixed-price deals limit its upside when GPU prices rise Markdown copy of https://realalpha.app/s/oracles-fixed-price-deals-limit-its-upside-when-gpu-prices/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy. - Speaker: [Dylan Patel](https://realalpha.app/people/dylan-patel/) · Founder & CEO, SemiAnalysis · Founded SemiAnalysis in 2020, a research firm tracking the chip supply chain and AI infrastructure buildout. - Host: [Alex Kantrowitz](https://realalpha.app/people/alex-kantrowitz/) · Founder, Big Technology · Former BuzzFeed News senior tech reporter and author of Always Day One. - Show: Big Technology Podcast - Episode: [Can AI Keep Growing Exponentially? Let’s Ask SemiAnalysis — With Dylan Patel and Jordan Nanos](https://realalpha.app/v/LwMtHI7BHWI/), Oct 9, 2026 - Moment: 43:50 to 48:49 of the episode (5 min), playing on https://realalpha.app/s/oracles-fixed-price-deals-limit-its-upside-when-gpu-prices/; the episode from there: https://realalpha.app/v/LwMtHI7BHWI/?t=2630 ## Quote > “**they signed them with a fixed margin**, essentially. So now that the price of GPUs has gone up a lot for clouds” > — [Dylan Patel](https://realalpha.app/people/dylan-patel/) at [47:26](https://realalpha.app/v/LwMtHI7BHWI/?t=2846) · Big Technology Podcast ## Takeaways 1. ClusterMax measures cloud service quality, not stock prospects. 2. Oracle's fixed-margin deals limit its upside as GPU prices rise. 3. Data-center delays and debt concerns remain separate execution risks. ## About this segment Dylan Patel separates Oracle's strong GPU-cloud operations from its financing and construction risks. Fixed-margin OpenAI contracts, debt concerns and data-center delays can still weigh on the company. From “Can AI Keep Growing Exponentially? Let’s Ask SemiAnalysis — With Dylan Patel and Jordan Nanos”, Oct 9, 2026. [Watch the full episode](https://realalpha.app/v/LwMtHI7BHWI/) ## Transcript Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there. [43:55](https://realalpha.app/v/LwMtHI7BHWI/?t=2635) i don't know how to feel about about them they're obviously their debt has been rated um you know not well by the rating agencies they're making this all in bet um they rate pretty high and they actually in your report have been credited with pioneering some techniques um but i would love to get your read out on on oracle and you know whether whether this has been a smart bet for them and whether you know they're going to do rise in glory or or sort of fall in flames, like a lot of people anticipate. [44:24](https://realalpha.app/v/LwMtHI7BHWI/?t=2664) I think the key thing about ClusterMax is it is not stock recommendations, right? It is not anything to do with, hey, this neocloud is going to build a gigawatt next year or 200 megawatts, which is far more relevant for the stock than, you know, what, how good are they at operating a cluster, right? It has nothing to do with, hey, this data center that they said they're going to deliver with this much capacity next year got delayed by three months. [44:50](https://realalpha.app/v/LwMtHI7BHWI/?t=2690) That's not what ClusterMax measures. ClusterMax is explicitly measuring sort of how good is the cluster for someone to use if you rent the GPUs. How reliable is it? How secure is it? How's the storage? How's the network? How's the lifecycle? How's the slurm on Kubernetes? How are all these things? In which case, you know, it's just sort of, we try to be more objective. Obviously, making a rating pyramid is like, you know, it is something you kind of have to do. [45:16](https://realalpha.app/v/LwMtHI7BHWI/?t=2716) It would be nice if you could just make a long report and no one cared if there were no rankings. I mean, that's what would happen. So you kind of have to do the rankings and set certain boundaries and you can always litigate the hell out of why and what is in what tier. But like, it is an objective fact that we think Oracle is one of the top Neo Clouds in terms of quality of service. Now, that doesn't mean on the other hand, hey, at SemiAnalysis in April, we published to our clients that their New Mexico data center was going to be delayed because they weren't going to get the pipelines. And this was a big issue for OpenAI because OpenAI has contracted a huge data center with them in New Mexico. [45:52](https://realalpha.app/v/LwMtHI7BHWI/?t=2752) But if these pipelines don't get built, this data center can't go up. And then later, Here, you know, we said it again in May and June, and then most recently, Oracle announced a force measure on it and their stock tanked because of it, right? So we're disentangling two things, right? Yes, Oracle is an amazing cloud for their managed cluster, one of the top neoclouds, but they also at the same time may have execution issues, whether it's regulatory in the case of this New Mexico data center where they can't get the pipeline there or other issues, you know, on their balance sheet, right? [46:24](https://realalpha.app/v/LwMtHI7BHWI/?t=2784) And so we're disentangling, like, what is good or bad for the stock versus what are we trying to test here? The goal in first ClusterMax was create something that people renting GPUs can use. And it turns out now, like, there's a lot of other uses for it that people try to ham fist in, whether it's like, you know, hey, we're going to write debt for this NeoCloud. If they upgrade rankings from bronze to silver, their rate will actually go down. [46:49](https://realalpha.app/v/LwMtHI7BHWI/?t=2809) You know, things like this or like, hey, I'm going to invest in stocks that are at the top of ClusterMax. So obviously these are like, these are not the decision. These are not what ClusterMax is designed for. It's a data point that you should use if you're doing anything with these companies. But as far as Oracle as a company, there's sort of like, you know, two things to go here, right? Like one is they signed a ton of AI data center deals with OpenAI. [47:17](https://realalpha.app/v/LwMtHI7BHWI/?t=2837) Was it last year? Yeah, it was last year. Holy crap. It was only last year. It feels like eons ago. I think it might have been exactly a year ago. But the interesting thing is they sign these massive deals and there's a number of risks embedded with them. One is they signed them with a fixed margin, essentially. So now that the price of GPUs has gone up a lot for clouds, they can't take advantage of this higher margin. [47:41](https://realalpha.app/v/LwMtHI7BHWI/?t=2861) So they're kind of hemmed in there. Number two, they raised a bunch of debt and then the market started getting freaked out about how much debt companies can have. And so they spooked out. even though Oracle is completely solvent. And then number three, they have some execution issues. You know, I mentioned the regulatory one. There's some other data centers that have some delays and such there as well. But the main one being this, you know, such as in Wisconsin, but the main one being this New Mexico site that is delayed potentially multiple years because of this pipeline issue. And so, you know, these things can have very negative impacts on the stock, but I think the company is still fine. Now, you know, they're not Nebius. Nebius gets to turnaround and they had the they have the shortest average contract length of the top clouds in [48:21](https://realalpha.app/v/LwMtHI7BHWI/?t=2901) cluster max um and so nebius has been able to turn around and really jack up pricing and take advantage of this right whereas core weave and oracle despite having also good cluster um you know management and reliability and security and all this stuff we're not able to take as much advantage because they lock themselves into long-term contracts primarily oh that is fascinating All right, Jordan, let me ask you a technology question then.