What Oracle's Fall From Grace Tells Us About The AI Data Center Business
Oracle's stock price is diving. Why? A lesson for the AI industry. An AI data center customer faces no switching costs as they are simply installing data and software in bare metal servers leased to them by the data center. The result is a buyer's market as opposed to the traditional sellers market in which Equinix and Digital Reality operate. Oracle, the software company, reinvented itself as a cloud provider and then pivoted to AI data centers when the cloud angle proved disappointing and AI became hot. But in a traditional data center the customer installs their equipment and this makes leaving the facility very expensive and difficult as it means they lose an operating network node. In many cases the exit costs can be in the millions of Euros or dollars and require a network redesign to ensure traffic flows are not disrupted. So the traditional data center is more like the Hotel California in the Eagles song where you can check in, but never leave. In contrast, mos...