Is Ellison's wealth surge justified?

Five charts to start your day

Larry Ellison briefly became the world's richest person last week, adding $89 billion to his net worth in a single day. That’s not bad for a day’s work. It’s also the biggest jump in net worth recorded by the Bloomberg Billionaires Index.

What happened was that Oracle's share price jumped 36% after it announced $455 billion in future contracted revenue. It sent the market into a frenzy. Analysts’ expectations were smashed.

OpenAI, the company behind ChatGPT, has reportedly signed a $300 billion deal with Oracle over five years. That seems impressive, until you look at OpenAI's finances.

OpenAI is expected to make $12-13 billion in revenue this year. It will lose $8-9 billion in the process. That means OpenAI spends roughly $1.70 for every $1 it earns. Last year, it lost an estimated $5 billion. The losses are accelerating, not shrinking.

What's even worse according to industry reports, is that OpenAI loses money on nearly every single customer. Free users obviously cost money. But even paying subscribers who shell out $20 a month for ChatGPT Plus are unprofitable. The computing costs exceed the subscription fees.

This is Oracle's star customer. The one that's supposed to justify a near-trillion-dollar valuation.

CHART 1 • Is Ellison's wealth surge justified?

Viewing the Bloomberg Billionaires Index feels almost sinful at times. It's disgusting how wealthy some people are, yet also fascinating. This is one of the most interesting stories I've seen recently with this data set. Look at the chart below. It's not often you see the world's richest man, Elon Musk, surpassed, albeit very briefly, by another equally determined billionaire.

Of course, this index is quite controversial in its construction due to the methodology used to calculate net worth. Public companies are easy to value, but private wealth in private assets is trickier to measure. There's also that glaring omission of Mr Bloomberg himself from the index, who is estimated to be worth at least $100 billion. Nonetheless, this is a stunning chart that points to not just the absurd amount of wealth involved, but also how that new paper wealth has materialised with a single financial report.

Source: Bloomberg

I have some more charts to share with you if you're interested. The second one is on Oracle and the other three are on completely different subjects. If you're interested, then sign up as a paid subscriber and you'll get them.