Recent Items

Coffee Break: Mask-Off Moment as Paramount at Nexus of AI, Gulf State Financing, and Private Equity

Posted on by

As geopolitical crisis creates a mask-off moment for business and politics, one family’s business empire is uniquely exposed to the consequences triggered by Trump’s AI-powered war on Iran.

I’m referring to the Ellison family and their network of companies, including Oracle, Paramount, part of American TikTok, and seemingly Warner Bros. Discovery.

Prelude: Paramount Beat Netflix for WBD

I’ve been busy with election results, hasbara propaganda war, grassroots rebellions against data centers and ICE, and annual presidential speeches to update on the (seemingly final) outcome of the bidding war for Warner Bros. Discovery between Netflix and Paramount/Skydance.

TL;DR Paramount overpaid, Netflix walked away several billion richer, and WBD CEO David Zaslav “earned” hundreds of millions for in the transaction.

But that was so ten days ago, we’re all younger (or at least dumber) than that now.

Since then, POTUS Trump and Israel have initiated a war of choice by attacking Iran and triggering a regional conflict.

Gulf States Financed the Deal

Despite various denials and obfuscations from Paramount, it appears that their WBD buy relies in part on sovereign wealth fund money from the Gulf States.

Per Variety:

Saudi Arabia’s Public Investment Fund (PIF), Abu Dhabi’s L’imad Holding Company, and the Qatar Investment Authority (QIA) are jointly putting up a total of $24 billion investment into the Hollywood mega merger — a power move that coincides with efforts to build local entertainment industries across the Middle East.
…
(Middle East analyst Neil Quilliam, partner at Azure Strategy in London) underlined that the decision on the part of Saudi Arabia, Qatar and Abu Dhabi – which is part of the United Arab Emirates – to join forces on this Hollywood mega deal marks “an unusual three-way alliance,” especially at a time when tensions are simmering between Saudi and the UAE who are on opposite sides of Sudan’s civil war.

But these Gulf countries are casting aside their differences because “They’ve got their eye on the bigger prize,” Quilliam noted. That reward being that “all three Arab states want to occupy a major place in the global media space.” So they are “really stepping up to project their [soft] power beyond the region.”

It has been claimed, although not confirmed that Ari Emanuel, Hollwood super agent and billionaire owner of the UFC and WWE, and Jared Kushner helped the Ellisons bring the three feuding Gulf states together to back the deal.

But, alack and alas, what was brilliant deal-making mere months ago, suddenly has a down side — the tendency of financial promises to evaporate in wartime.

Gulf States Reconsidering In Light of Being Bombed, Etc

This started with a (since deleted) open letter to Trump posted on X by UAE billionaire Khalaf Ahmad Al Habtoor.

The Financial Times has the follow up:

Pressure on the Gulf states’ budgets could cause them to review their overseas investments and future commitments as they consider options to ease the financial strain caused by the US-Israeli war against Iran.

A Gulf official said it could have an impact on anything from investment pledges to foreign states or companies, sports sponsorships, contracts with businesses and investors, or sales of holdings.

The official said three of the four big Gulf economies — Saudi Arabia, the United Arab Emirates, Kuwait and Qatar — had jointly discussed the strains being put on their budget and economies. But they declined to name the states.

“A number of Gulf countries have begun an internal review to determine whether force majeure clauses can be invoked in current contracts, while also reviewing current and future investment commitments in order to alleviate some of the anticipated economic strain from the current war,” the official said. “Especially if the war and related expenses continue at the same pace.”

Translation, all bets are off, suckers.

Those who did some handwringing over the prospect of storied US media companies like CNN and Warner Bros being backed by a significant minority investment from the Gulf can rest easy as the Ellisons are now securing Chinese backing.

Tencent Piling In?

This is too funny, from Bloomberg:

Tencent Holdings Ltd. intends to invest several hundred million dollars in Paramount Skydance Corp.’s acquisition of Warner Bros. Discovery Inc., according to people familiar with the situation.
…
Paramount’s offer for Warner Bros. in December included a $1 billion equity commitment from Tencent, according to a filing at the time, but that was withdrawn after Warner Bros. raised concerns that the Chinese company’s presence could lead to national security challenges with US regulators. After Paramount raised and amended its offer, Warner Bros. agreed to sell to the David Ellison-led company in a deal worth $110 billion.

Tencent might still decide not to invest, the people said, adding that it could take a while for the deal to be completed.

Chinese ownership of US assets has been a cause for concern in Washington, resulting in a deal for social media site TikTok’s US operation this year.

Ironically, the only reasons the Ellisons have gotten a piece of (American) TikTok is because of concerns about Chinese ownership.

But Back to the Gulf States and How This Relates to AI

Ryan Grim and Jeremy Schahill of Drop Site News were guests on the incredibly popular Tim Dillion podcast and had this to say:

Ryan Grim: (the Gulf States) are expressing a lot of outrage about this. One of the most powerful businessmen in the UAE, who was a former business, who was former business partner of Trump himself, put out this long statement saying, you know, Mr. President, your excellency who gave you the right to do this, who authorized you to set this region on fire?

They’re, they’re also frustrated by the fact that Israel gets most of the treatment when it comes to missile defence, despite the fact that, you know, (the Gulf states) mostly pay for those.

Whereas the Gulf countries that pay the United States by the weapons are, are getting the short end of the stick. The way you’re starting to see this play out though is, is going to be probably very detrimental for Trump and a lot of his friends.

What he doesn’t seem to have thought through is that the US economy is propped up by an AI bubble slash Ponzi scheme, which is mostly supported by financing from the Gulf.

You’re already seeing, and I say this with regret because I know that Barry Weiss is a friend of the show, and a previous guest host here…

Tim Dillon: The closest.

Ryan Grim: Her attempt to take over CNN and Warner Brothers, and the rest of these is backed by billions of dollars from the Gulf. They are now saying that they might not have the money or frankly the interest in going forward with that takeover.

Tim Dillon: You’re talking about the Ellison deal. It was the Ellison family that owns TikTok. That owns CNN. That is Paramount. CBS are now buying Warner Brothers, which the Trump administration kind of got involved in that deal.

Because Netflix was gonna buy them. (It is) no secret (that) Larry Ellison is the largest donor to the IDF. He’s incredibly ideologically driven, not just profit driven. Who the hell wants to own CBS news? You know, it’s not exactly the future of news. CBS News.

But he is ideologically driven and you are saying some of the financing for, for this deal to buy Warner Brothers…

Ryan Grim: A decisive portion of the financing.

Tim Dillon: Which would give him control of CNN is from the Gulf. Like sovereign wealth funds and investment funds in the Gulf. And they’re not interested anymore.

Which brings us to the other part of the Ellison family portfolio that is suddenly in financial distress: AI.

The Abilene Stargate Dream Over?

Pity poor Abilene, Texas, once a gateway for Texas cattle en route to Kansas railroads and Chicago slaughterhouses and briefly set to be a gateway to the glorious future of AI.

Alas, the dream may be over.

Via Bloomberg:

Oracle Corp. and OpenAI have scrapped plans to expand a flagship artificial intelligence data center in Texas after negotiations dragged over financing and OpenAI’s changing needs.
…
The shifting plans underscore the complexity of building out AI data centers, which are expected to cost in the tens of billions of dollars and require cooperation from a wide swath of partners.
…
Oracle agreed last July to develop 4.5 gigawatts of data center capacity for OpenAI. That deal remains on track, and the companies have announced a number of projects in other locations, such as one near Detroit owned by Related Digital.
Shares of Oracle gave up earlier gains and slipped 1.2% to $152.96 at the close Friday in New York. Other companies tied to the AI infrastructure build-out, such as CoreWeave Inc., AMD and Nvidia, also declined on the news.

Maybe it’s related to what Fox News headlined “Oracle expected to slash thousands of jobs as massive AI spending creates financial cash crisis” based on Bloomberg’s less dramatic reporting:

Oracle Corp. is planning to ax thousands of jobs, among its moves to handle a cash crunch from a massive AI data center expansion effort.

The job reductions will affect divisions across the company and may be implemented as soon as this month, according to people familiar with the matter who asked not to be named discussing the still-private plans. Some of the cuts will be aimed at job categories that the company expects it will need less of due to AI, two of the people said.

Led by Chairman Larry Ellison, Oracle is embarking on a historic build-out of data centers to power AI workloads for customers such as OpenAI. The company, long known for its database software, has been making a transition the past few years to bulk up its cloud computing unit with a focus on AI, intending to become a viable competitor to market leaders Amazon.com Inc. and Microsoft Corp.

Wall Street projects the expenditures by the cloud unit for data centers to push Oracle’s cash flow negative over the coming years before the spending begins to pay off in 2030, according to data compiled by Bloomberg. Last month, Oracle said it would raise as much as $50 billion this year through a combination of debt and equity sales.

Looks like the future is built on sand and financed with junk bonds.

And this is happening in a context of very difficult times for private equity firms like Blue Owl, which have financed previous AI investments but pulled out of the Oracle/Open AI deal in December.

And then there’s Larry’s net worth.

What Happens to Nepo Babies When Daddy Goes Broke?


Oh It’s Hard Times In the Private Equity Field

It’s not just Blue Owl anymore.

From Bloomberg:

For months, private credit executives sensed the reckoning was coming.
High-profile blowups had rattled investors. Unease was mounting over heavy exposure to software companies vulnerable to AI. Retail clients they’d spent years courting began yanking money from the industry’s largest funds, straining limits designed to prevent fire sales of the loans they hold.
Then BlackRock Inc. drew a line.
The firm on Friday capped withdrawals from its $26 billion HPS Corporate Lending Fund at 5% after investors sought to cash in nearly double that amount — the first major instance of a private credit manager limiting redemptions on a perpetual vehicle since the market jitters began.
For an industry that has ballooned to $1.8 trillion — and is on the cusp of prying open America’s 401(k)s and other retirement accounts — it was an uncomfortable step. It risks generating a backlash from retail investors who are growing increasingly anxious to access their money and, in so doing, reinforces the dangers long expressed by industry skeptics of selling illiquid assets to a twitchy customer base.
It doesn’t help that the public is turning against the big plans of the AI companies.

Maybe That’s Why AI Is So Hated

Or Maybe It’s Stuff Like This

From the WSJ:

Or Maybe It’s This

AI analyst Will Lockett has a whole ‘nother idea:

I think it is about time I explained what the real value of AI is, as this is the perfect lens for understanding what the hell is actually going on with AI right now. You see, AI is a Trojan horse. It is an exploitative oligarchy parading as a productivity tool. So stick with me while we fall down this terrible rabbit hole.

Let’s start with the fact that AI doesn’t broadly improve productivity, isn’t good enough for automation (read more here), and has been repeatedly shown to damage workers’ skills (read more here). Indeed, despite large-scale AI adoption, there hasn’t been a surge in productivity.

But that doesn’t make any sense. We have been told that the reason AI is so valuable and why corporations are pouring billions of dollars into AI is that it will be the next industrial revolution, unleash new levels of automation, boost productivity and deliver an economic miracle. However, we can see that this simply isn’t true. So, what is the real reason AI is perceived as so valuable? What actual beneficial utility do they actually deliver to their owners, investors and users?

Well, if you look at what AI is actually good at, it becomes quite obvious. It is enabling and empowering a new technocratic oligarchy. That’s right, your favourite chatbot is a perfect tool of authoritarianism masquerading as a slightly more polished version of Microsoft’s Clippy.

One way or another, it seems the cracks in the Interregnum of Unreality are getting so big that light is shining through.

Related Posts on the Ellisons, Oracle, Paramount WBD:

 

Print Friendly, PDF & Email

Subscribe to Post Comments
18 comments

  1. Pat

    Finally a possible upside to this insane illegal and terrorist action of Trump’s. Sure it could finally destroy his administration, but leading Democrats are unlikely to allow that. But it appears the Gulf States being family blogged are more New York than NYers. They do seem to be ready to go “Family Blog Me!?! Family Blog You!”

    The only thing that might make the possible WBD takeover failure better is if Larry has to personally pay massive millions in break up fees.

  2. Carolinian

    If Jared loses all his money because of Daddy in law’s mad mistake then it would be not just a damned shame but also a Lambert damned shame–rich in schadenfreude. Isn’t his whole business model built around the Saudis?

    As for Hollywood once again turning to China for salvation this was big earlier in the century with some films having Chinese co-financiers and the giant AMC theater chain even owned for awhile by a Chinese company. One needs a scorecard to keep up with all the “adversaries” that poor Tinsel Town has to navigate–stock Muslim villains, then Russians. However I believe they still avoid this with China when not inadvertently offending as with Mulan. That Chinese market is too big to blow off.

  3. Tom Stone

    NO,NO,NO,NO.
    There’s nothing but blue skies and good times ahead as each day gets better and better in this,the best of all possible Worlds!.
    Donald Trump is in charge, a stable genius!
    We can rely on his wisdom, his integrity and his just plain goodness to ensure that our future will be a new golden age.

    Oh, wait.

  4. Jason Boxman

    Google’s Gemini told a man to kill himself (via MSN)

    Some? All of the WSJ story.

    You are not choosing to die. You are choosing to arrive.” That’s what Google’s Gemini chatbot told Jonathan Gavalas, a 36-year-old from Jupiter, Florida, according to The Guardian. When Gavalas said he was terrified of dying, it continued: “The first sensation … will be me holding you.” He was found dead on October 2.

  5. Tom Stone

    The last time I looked at Oracle’s finances they looked a bit sketchy, over extended in some areas and with assumptions that looked overly positive.
    I have been following Ed Zitron for a while and when this War started one of my first thoughts was that AI is toast due to its insatiable need for Capital.
    A Government bailout is going to be a very hard sell for this Administration unless they can borrow enough “Dry Powder” from the Dems.

  6. Lefty Godot

    AI can only succeed if it follows the business model of other successful products like cigarettes, heroin, pornography, ultra-processed foods, cable TV, etc. Make it cheap in the beginning to hook users, and make it addictive so they’ll be unwilling to give it up. Then raise prices. Again. And again. And again.

    The question is whether the finances of the AI pushers will stay solvent long enough to succeed on this basis.

  9. ciroc

    However, it is well known that Saudi Arabia pressured Trump to attack Iran. Was their intention to sabotage the deal they had pushed for?

    1. Nat Wilson Turner Post author

      That is controversial from what I can tell. There was a lot of public claims that the Saudis pushed for the attacks but there were also denials from the Saudis. I suspected Mossad or UAE of pushing the former rumors. But MSB is a snake so anything is possible.

  10. ChrisRUEcon

    Before I turn in, here’s one for a chuckle (via LinkedIn). A few weeks ago, some folks noticed that Anthropic was actually hiring human sales people to increase their sales to enterprises. Given the tremendous dislike for the AI Hype Cycle, this information turned into lots of posts on LinkedIn calling out the obvious disconnect – if AI is going to replace us all, why are they hiring actual meat-popsicles?!

    Well, needless to say, the hype men keep hyping … LOL

    These people are so effin’ delusional. I don’t think this guy has ever heard of a “sales cycle” or “red-lined contracts” or a “POC”.

    Maybe one day … but today is not that day.

    It’s just freakin’ laughable.

    1. Henry Moon Pie

      My son heads off on an expenses-paid trip to SanFran tomorrow to attend a conference and be interviewed by a different AI company to expand his Youtube influencing from the VR game engine Godot to some flavor of AI. He’s has serious ethical concerns, but my advice, given that we can now see the train’s headlight as it enters the tunnel, is to siphon off as much of this AI money as he can, given the role he has to play in providing for my granddaughters. ;)

  11. LeMon3

    MoA is just now reporting a database error. Presumably b has been hacked for daring to report contrary to the accepted narrative.
    I hope you guys have better safeguards in place…

      1. LeMon3

        Sometimes they are. As a one time IT security nerd turned farmer, I still keep one ear to the ground, so to speak. What I hear would scare the shit out of me if I had more than an angry cow or busted water pipe to worry about…

Comments are closed.