Coffee Break: OpenAI, Sora, Iran, the Ellison Empire, and Maybe a Recognition Event?

OpenAI’s shutdown of its Sora video generation engine service and the ensuing cancellation of a $1 billion deal with Disney may represent a recognition event for the company and the larger LLM economic boom.

A recognition event, as Yves reminded us in today’s Iran War post, is when a financial institution has to mark down an overvalued asset to market price.

POTUS Trump’s Ramadan War on Iran may even be playing a factor.

But let’s look at the latest additions to the fact set first.

What Happened With OpenAI, Sora, and Disney?

The news dropped yesterday, the NYT had the basics:

OpenAI is shutting down Sora, the video-generation technology the company unveiled in 2024, shocking entertainment executives with its ability to use artificial intelligence to quickly produce short videos that looked as if a Hollywood studio had made them.

Just three months ago, OpenAI and Disney signed a three-year licensing deal allowing Sora users to generate videos with Disney characters like Mickey Mouse, Cinderella and Yoda. The agreement was considered a watershed for the tech industry and Hollywood, and some worried it was the first big step toward replacing the entertainment industry’s actors and creators with A.I.
…
OpenAI did not give a reason for shutting down Sora. But the decision appears to be part of the company’s efforts to focus and streamline its operations as it prepares for an initial public offering as early as this year.

Last year, OpenAI pulled in about $13 billion in revenue, but it expects to spend about $100 billion more over the next four years, in part for a major expansion of data centers.

Running a video-generation service — particularly a consumer app with no source of revenue — is an enormous expense. A.I technologies like Sora require far more computing power and electricity than traditional internet services.

Variety had Disney’s statement:

Disney has now ended its partnership with OpenAI, which included plans for the media conglomerate to take a $1 billion stake in the artificial-intelligence company led by CEO Sam Altman.

A Disney rep said in a statement to Variety: “As the nascent AI field advances rapidly, we respect OpenAI’s decision to exit the video generation business and to shift its priorities elsewhere. We appreciate the constructive collaboration between our teams and what we learned from it, and we will continue to engage with AI platforms to find new ways to meet fans where they are while responsibly embracing new technologies that respect IP and the rights of creators.”

Variety also lets readers know that Disney’s cease-and-desist letters to Google, Meta, and some other generative AI companies are still in effect.

Turns Out It Was a Money Deal

Business Insider explained the move as a matter of corporate focus for OpenAI:

The product was a breakout hit when it launched last year. So why shut it down?

The answer comes down to a growing constraint across the AI industry: compute.

“Given the frantic search for more compute across the industry, OpenAI is prioritizing its greatest growth engine — ChatGPT,” says Bernard Golden, CEO of Navica, a Silicon Valley-based tech analysis, consulting, and investment firm.
…
Demand for AI compute has surged in recent months. Data from OpenRouter’s model platform shows usage more than tripled in 2.5 months, a sign of explosive growth.

At the same time, supply isn’t keeping up. Building new data centers has become harder due to local opposition, energy constraints, and shortages of key components such as memory chips.

OpenAI has moved aggressively to secure capacity, committing hundreds of billions of dollars to data center and chip deals. Even so, it still doesn’t have enough compute to support everything it’s building.

That piece also refers readers to a Business Insider profile of OpenAI’s new CEO of Applications Fidji Simo, at whose feet the decision to kill Sora is lain:

Simo, the 40-year-old former Instacart CEO and longtime Meta executive, became OpenAI’s product boss in August under CEO Sam Altman. While Altman has long been the face of OpenAI, Simo is increasingly shaping how the company operates and makes money.

“Part of bringing me on, and giving me the responsibilities of a CEO, was to make sure that I could really run that part of the company with autonomy,” Simo, whose title is CEO of applications, told Business Insider.

Altman defers to Simo when he doesn’t feel strongly, she said, and they “debate it out” when he does.

As OpenAI races toward a possible IPO later this year, Simo, who oversees nearly two-thirds of the company, has a delicate balancing act. She must craft a strategy to make products profitable, while convincing staffers who joined a research-driven organization that commercialization won’t change the mission.

Simo has her work cut out for her trying to clean up after “Scam” (as his old friends like Elon Musk call him) Altman and his various mission-shifts and massive expenditures.

404 Media has a more pointed analysis:

…the complete and utter failure of both Sora and Disney’s dalliance with AI garbage suggests AI slop is indeed not the future of Hollywood. Disney did not even get to the point here it allowed people to build anything with Disney characters before pulling the plug on the whole endeavor and its investment.

Sora is dead. May the memory of its four-month existence as a copyright infringement machine that was also used to make videos of men strangling women and ICE arresting undocumented immigrants be a blessing.

Disney is pulling out of its billion-dollar investment in OpenAI entirely. Other efforts to slopify Hollywood look underwhelming, appear to have been quietly shelved, or have utterly failed to gather any audience whatsoever. This news does not bode well for OpenAI and it likely does not bode well for Paramount’s megamerger with Warner Brothers, a deal whose financial terms and the debt involved only make sense if you can believe in a future in which the cost of creating blockbuster movies is drastically reduced by AI via huge numbers of people losing their jobs.

At the time of Disney’s announcement with OpenAI, it was hard to imagine why Disney would infect its flagship paid streaming service with content from a service whose viral videos consisted of users turning Pikachu into a felon and SpongeBob into Hitler. It was not clear why Disney would want AI slop made by randos to live next to, say the $200 million Toy Story 4 or any number of Disney’s masterpieces. It was also hard to imagine why a company that has so aggressively enforced its copyright would suddenly say all bets are off for Sam Altman’s plagiarism machine. The only thing that made any sense is that Hollywood executives, like Silicon Valley executives, hate paying for human labor so much that they have convinced themselves that their customers would happily consume AI slop if it was shoved down their throats.

After Sora’s initial novelty wore off, it became clear that people do not actually want this, and that the people using Sora were using it at great financial cost to OpenAI in order to largely take videos off-platform to spam other social media sites.

Wait, what’s this about the end of Sora not boding well for the Ellison media empire and its acquisition of Paramount and WBD?

I’ll come back to that, but first I need to review other ways in which Trump’s Ramadan War on Iran threatens the AI bubble.

You Shouldn’t Data Center In Other People’s Misery

While subscribers to the SupplyChain247 newsletter may already know all about the “Seven Ways the Iran War Could Disrupt Global Tech Supply Chains,” like most unwanted eruptions of reality, it’s largely been ignored by Mr. Market.

National Interest focuses on the impact of disruptions to the helium market and how that simple element will function as “America’s Hidden AI Chokepoint“:

Everyone is watching the Strait of Hormuz for oil, liquefied natural gas (LNG), and fertilizer. Far fewer are tracking the same waterway as a pressure point for magnetic resonance imaging (MRI) systems, semiconductor fabrication, and aerospace production. Helium is what makes modern economies and militaries function. Helium cools superconducting magnets in MRI systems, supports semiconductor fabrication, enables leak detection and pressurization in aerospace, and serves a range of high-precision industrial processes with demanding purity requirements. Helium becomes the next critical industrial chokepoint around the world.

The Iran War is pushing that vulnerability into plain view. Since March 12, disruptions tied to halted gas processing in Qatar removed 5.2 million cubic meters of helium per month from the market, triggered force majeure declarations, and doubled spot prices. Qatar matters because it is one of the world’s dominant helium suppliers, with the QatarEnergy LNG Ras Laffan complex being a major global production hub and home to the world’s largest helium plant. Additionally, 2025 US Geological Survey data shows world helium production around 190 million cubic meters, with the United States at 81 million and Qatar at 63 million, giving the two countries an outsized role in the global market—analogous to the LNG market.

Helium is a strange commodity with unforgiving physics—yet most Americans only experience it when going to the local dollar store to get cheaply filled balloons. Once liquefied, it continuously boils off over time, and industry executives have reported that the practical delivery window is about 45 days before losses become severe. That means the market runs on throughput, timing, and logistics discipline more than on the kind of stockpiling logic that works for crude oil or grain. In a prolonged disruption, like the Iran War appears to be becoming, inventories do not simply get drawn down. They dissipate.

That reality has immediate American economic implications for the material foundations of the artificial intelligence (AI) boom, and it stings even deeper into the US and allied defense industrial base than most policymakers appreciate.

The Financial Times has more on how “How the Iran war could derail the AI boom“:

…the Iran war is exposing fragilities in the AI supply chain.

First, east Asian nations at the heart of global semiconductor production are facing severe energy shocks.

South Korea’s Samsung Electronics and SK Hynix dominate memory chip manufacturing, together accounting for 80 per cent of high-bandwidth memory and nearly 70 per cent of dynamic random-access memory. These power AI systems and cloud data centres as well as smartphones and cars. Taiwan’s TSMC makes 90 per cent of advanced semiconductors and virtually all of the high-end AI chips designed by Nvidia, the world’s most valuable company.

Both South Korea and Taiwan depend on fossil fuels for energy, which almost entirely come from imports particularly via the Strait of Hormuz. The latter relies on the Middle East for more than one-third of its liquefied natural gas needs.

Asia’s chip industry is reliant on the Middle East for chemicals too. About one-third of global helium supply — a byproduct of natural gas processing that is used to cool silicon wafers — is from Qatar. South Korea and Taiwan get the majority of their helium from the Gulf country, which is a dominant provider of the hard-to-substitute, high-purity variety.

Roughly half of global seaborne sulphur — an element used for chip cleaning and etching — transits the strait. Even before the war broke out sulphur was facing a supply squeeze, owing to high demand from the tech and electric vehicle industries.

The Dead Sea is also the world’s largest source of bromine, a chemical that helps score patterns on to silicon wafers. South Korea imports virtually all of its supply from Israel.

Next, the conflict could alter the economics of data centres. In the US, where hyperscalers are set to spend $650bn on AI infrastructure this year, close to 75 per cent of planned on-site power comes from natural gas. But US LNG exporters are rushing to sell supplies to Europe and Asia, where because of shortages they can command higher prices. This will push up American energy prices. (Electricity accounts for roughly half of a data centre’s operating expenses.)

And that’s not even mentioning the Amazon data centers in Bahrain and the UAE that Iran has literally blown up.

Ok, with all that down on paper, we can turn to the Ellison media empire and how OpenAI’s troubles impact Oracle and thereby Paramount/WBD.

Check this graphic from Morgan Stanley, note the arrow going from OpenAI to Oracle that says $300B (ie that OpenAI has promised to pay Oracle that much) and the arrows leaving Oracle pointing at “Data Center Lease” and chipmakers Nvidia and AMD totaling about the same amount (ie Oracle is screwed if OpenAI can’t pay them):

Hell of a graphic from Morgan Stanley pic.twitter.com/GHgjrrkodI

— Lydia DePillis (@lydiadepillis) March 25, 2026

Sorry, I just gotta add two more bits that show how screwed OpenAI is before we get to the Ellison Empire.

OpenAI Is A Desperate Player in a Desperate Time

Check this from Reuters about OpenAI’s brutal competition with Anthropic (maker of Claude) for private equity money:

OpenAI is offering private-equity firms preferred equity stakes with a guaranteed minimum return of 17.5%, significantly higher than typical preferred instruments, two people familiar with the matter said. It is also offering early access to its newest AI models as it seeks to enlist investors such as TPG and Advent for its joint venture, three sources said.

The company has recently doubled down on enterprise, an area where Anthropic has historically been stronger. By comparison, Anthropic’s enterprise-focused private-equity ​deal offered no such returns, the sources added.

OpenAI and Anthropic are competing for partnerships with buyout firms that would allow them to quickly roll out their AI tools to ​potentially hundreds of private, established companies owned by buyout firms. This would boost the adoption of their models and encourage customer stickiness at scale.

And this is happening in a context of multiple major private equity firms limiting customer withdrawals in the past month, which can’t be a great sign.

Sean Paul Kelley warns we’re heading for the “Ponzi Unwind” part of the credit cycle.

Ok, now on to the Ellisons, are a father-son team attempting to build a media empire virtually overnight.

Does This Mean Nepobaby David Can’t Pull It Off?

I’ll have to make reference to FT.com’s profile of David Ellison to explain the hole that father Larry has dug for the family:

In the span of only seven months Ellison has committed nearly $120bn to secure Paramount and Warner Bros Discovery. If regulators assent to the latter deal, two of the most illustrious studios in Hollywood history could soon be owned by a youthful producer known for his vast family fortune, love of stunt flying and middle-of-the-road taste in films.

It is the most audacious power grab Hollywood has seen in years — and a test of whether dynastic wealth, political connections and a passion for movies are enough to build a successful media empire during a period of epic disruption.

Ellison’s entertainment empire will own two century-old studios freighted with challenges, many of which stem from the streaming revolution launched by Netflix in 2007. Both companies own large portfolios of cable TV networks that have been losing viewers and revenue for years as audiences shifted to streaming. Then there is the $79bn mountain of debt taken on to pay for the Warner Bros deal.
“This is a tough, tough industry,” says a Hollywood studio executive. “It’s a shrinking pie. It really is just going to be the same slog that it was for Discovery,” the executive adds, referring to the merger that created the current WBD.

Ellison is pitching his deal as a solution to this malaise. “We have the opportunity to help shape the future and build a next-generation media and entertainment company,” he said this month. “This is not about consolidation, it’s about reinventing the business.”

Many in Hollywood and on Wall Street wonder whether Ellison, whose management experience has been limited to running his own independent studio, Skydance, has what it takes to pull off such a complicated deal in a challenged industry.

“It’s interesting that the guy in charge of the largest and most leveraged film and television merger in world history has not previously run a large company before,” says Peter Supino, an analyst at Wolfe Research, of Ellison.

“The execution risk and the financial risk are exceptionally high, and they must be higher with a person in charge who’s new to running large companies.”

There’s one other connection I need to make between OpenAI, the Ellison Empire and current events: a big chunk of the money required to close the deal is coming from the Gulf States.

A claque of Dem senators wrote a mean letter to the FCC complaining about the Ellisons’ foreign financing, per The Hollywood Reporter:

A group of Democratic lawmakers are sounding the alarm about foreign investors backing Paramount Skydance‘s $111 billion proposed deal to acquire Warner Bros. Discovery.
…
Saudia Arabi’s Public Investment Fund, the Qatar Investment Authority and Abud Dhabi Investment Authority are collectively providing roughly $24 billion in funds to help bankroll Paramount’s bid for Warner Bros. Discovery, according to SEC filings. For years, these funds have bankrolled global buyout firms, including Apollo Global Management, which is among the groups financing the offer. The deal was structured to provide capital through non-voting equity investments, meaning the financiers don’t have any governance rights.

In the letter, the senators said that the financing was purposely designed to avoid triggering mandatory review by the Committee on Foreign Investments (CFIUS) in the United States, which assesses investments in businesses that could pose a national security risk. The Middle Eastern funds could try to advance “conflicting interests” from those of the U.S. with influence over CNN’s editorial decisions and business priorities, they wrote. Of particular concern is Saudi prince crown prince Mohammed bin Salman, who is widely believed to have ordered the murder of The Washington Post reporter Jamal Khashoggi in 2018, according to the letter.

I’m not going to bother to point out the ridiculousness of getting exercised about the potential influence of the Gulf States on Paramount’s editorial decisions when the entire Ellison Media empire is a giant hasbara op on behalf of Israel.

And heck, CNN was already hiring Israeli spies to write news under their previous owners.

Before I move away from the Ellison hasbara op, I do want to gloat about the terrible job Bari Weiss is doing at CBS News, via Status.news:

Six months into Bari Weiss’ overhaul of CBS News, new ratings data obtained by Status shows its flagship programs are shedding viewers at an alarming rate, collapsing to historic lows and accelerating the network’s decline.

When Bari Weiss took the reins of CBS News in October, her message was clear: that the public had lost trust in the network and that major change was needed to win viewers back and return it to its glory days. But through a series of actions over her turbulent six-month tenure as editor in chief, it appears the proud anti-woke warrior has instead helped destroy that trust—something that is now laid bare in the network’s rapidly shrinking ratings. Indeed, new ratings data obtained by Status isn’t just bad for Weiss. It is catastrophic.

With the first quarter set to wrap at week’s end, Weiss’ relaunched “CBS Evening News” with Tony Dokoupil is on track for its lowest-rated first quarter of the 21st century in both total viewers and the advertiser-coveted 25-54 demographic, according to preliminary Nielsen ratings obtained by Status.

I should also mention that those Gulf States helping finance the WBD buy are currently getting shellacked by Iran and may be forced to reallocate their capital away from foreign investments in response.

That’s not going to be good for the Ellisons.

Ellison Empire Build on a Foundation of Sand?

Slate has a piece that should scare investors in any of the Ellisons’ companies:

(The Ellison’s) business moves are way riskier than they’re letting on—and that the House of Ellison is much, much shakier than it appears.

For one, the debt load incurred across these purchases is staggering, and the means of covering it are no longer assured. The TikTok deal and the Warner Bros. buyout were both completed with multibillion-dollar guarantees from the sovereign funds of Gulf states like Saudi Arabia, the United Arab Emirates, and Qatar. Lately, those countries have been displeased with their American friends: The United States’ illegal, indefinite war with Iran has spurred that regime to attack its Middle Eastern neighbors in turn, heavily disrupting their economies and their overall stability. (Even worse: Iranian leaders have explicitly named Oracle’s Mideast data centers as potential military targets.) As a result, multiple international outlets have reported, the leaders of those Arab nations are seriously reconsidering their biggest investment pledges in U.S. companies—especially in A.I. and tech.

This does not portend an all-around divestment from America. But even a small pullback in Gulf spending, reoriented from U.S. businesses—like Oracle and Paramount—toward the domestic buildup of defense capacity and economic stimulus, would leave the Ellisons without billions of dollars in needed funds. (For further context: The Arab governments agreed to back at least one-fifth of the Warner Bros. takeover. And the UAE, alongside Oracle, is helping to cover an unprecedented $10 billion fee to the U.S. Treasury as part of the TikTok agreement.)

But their perils aren’t just international. Oracle’s stock, which benefited so greatly from the A.I. boom that its valuations briefly made Larry “Bad Doggy” Ellison the second-richest man in the world, is currently sitting at half the peak it reached last year. These days, there’s just a lot more skepticism over Oracle’s promised technological expansions. A few of its bondholders have sued the company, claiming it hasn’t been transparent about the heaping costs required to meet its data-center-buildout goals. In belated recognition of those construction expenses, Oracle announced earlier this month that it would freeze hiring in certain departments and potentially lay off up to 20 percent of its global workforce, while adding even more debt to its balance sheet in order to placate stakeholders. Nevertheless, investors reportedly remain uncertain that Oracle will meet all its obligations—not least since its Trump-hyped plans for a big Stargate data center complex, in partnership with OpenAI, fell through earlier this month.

Oh yea, OpenAI, the company that started this post. Turns out Larry and David Ellison’s whole plan hinges on Scam Altman succeeding.

Ed Zitron has pointed out the extent to which Oracle, the foundation company of Larry Ellison’s empire, is dependent on the success of OpenAI:

Oracle expects to spend $50 billion in capex in the fiscal year 2026 as of its last quarterly earnings in December 2025, an increase of $15 billion from its estimate from the previous quarter. I imagine these “estimates” will magically increase next quarter too.

Based on TD Cowen’s maths, Oracle needs at least another $100 billion if it intends to complete the 4.5GW of capacity that OpenAI has asked for.

To make matters worse, in Oracle and OpenAI’s September 23, 2025 post, Oracle intends to build 10GW of capacity in total by 2030, with most of the remaining 5.5GW of capacity remaining unnamed and unplanned. That 5.5GW, based on TD Cowen’s maths, would require another $231 billion, most of it in the next year or two.

OpenAI Cannot Afford To Pay Oracle — And Is Intentionally Misleading The Media About Its Cash Burn
…
Oracle Cannot Survive OpenAI’s Collapse — And Is Relying Entirely On Its Ability To Raise Funding

Oracle’s atrophying software and licensing businesses are currently being papered over by the supposedly-glorious future of AI, but in truth, even Wall Street is tiring of its egregious promises.

And honestly, everything I’ve been writing is under the assumption that OpenAI pays, because if it doesn’t, Oracle is completely, inextricably fucked.

There is literally no other customer who could ever hope to spend this money. I’m deadly serious.

Could all this bad news be the recognition event that pops the AI bubble, ends the Ellison Hasbara Empire, and ends The Interregnum of Unreality?

Stay safe and stay tuned dear readers.

Related Posts on the Ellisons, Oracle, Paramount WBD:

• Trump Makes an Example Out of Paramount
• Larry Ellison + Oracle + AI + Paramount + Trump = Total Info Control
• Delusion, Deception and Dipshittery: Hasbara on the 8th Front
• Tony Blair and Larry Ellison Make One HELL of a Partnership
• Pyrrhic Victory Drives Dystopian High Tech Drive for Control
• Bari Weiss Will Run CBS News for the Ellison Hasbara Empire
• Hogs at the AI Slop Trough, Gulf States, UFC Edition
• Hasbara Ain’t Cheap, Musk, Ellison, Saudis, All Tapped
• Informational Force-Feeding Divides and Distracts
• Bari Weiss’ CBS Not an Auspicious Beginning to Total Info Control
• Oracle Debt and TikTok Transition Troubles Vex the Ellison Media Empire
• Paramount Still Reaching for WBD as CBS Misplays Colbert-Talarico Interview
• Mask-Off Moment as Paramount at Nexus of AI, Gulf State Financing, and Private Equity

Related Posts on OpenAI:

• OpenAI as The Money Pit
• Silicon Valley Ideologies as a Lens for Viewing Current Events
• Flailing OpenAI Follows Meta’s Malignant Model
• Artificial Super Intelligence: The Faith of the Tech Elite
• The Tangled OpenAI and Microsoft Alliance Frayed Under Pressure
• Elon Musk Headed for Supernova with OpenAI Suit, SpaceX-xAI Merger?