Why the Oracle-OpenAI deal caught Wall Street by surprise

In this Newsletter Today:

• Why the Oracle-OpenAI deal caught Wall Street by surprise

• xAI reportedly lays off 500 workers from data annotation team

• Micro1, a competitor to Scale AI, raises funds at $500M valuation

• AI Tutorial

• 5 Best AI Tools

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Why the Oracle-OpenAI deal caught Wall Street by surprise

OpenAI and Oracle shocked financial markets by signing a five-year deal worth $300 billion for cloud computing infrastructure. It sent Oracle’s stock soaring — but many analysts say the level of commitment reveals deeper strategy shifts behind the scenes.

Key Points:

• Heavy price tag & scale: The sheer size — $300B over five years — was far bigger than most expected. It signals OpenAI’s confidence in needing massive compute capacity.

• Diversification & risk spreading: OpenAI is no longer relying mostly on Microsoft (Azure). Working with Oracle helps reduce risk by spreading infrastructure across multiple providers.

• Oracle's comeback: Many viewed it as a legacy cloud provider, not as competitive as Amazon AWS, Google Cloud, or Microsoft. This deal reminds the market that Oracle still has strong infrastructure chops.

• Questions linger—power and payment: The contract headline is striking, but details are unclear. Where will the electricity for all the data centres come from? How will OpenAI fund such compute demand vs. its revenue and costs?

• Compute + energy = a big bottleneck: Even with compute contracts in place, power infrastructure is a big challenge. AI compute uses huge amounts of electricity; sourcing clean, cost-effective energy at scale is still a concern.

Why Wall Street cares:

• Oracle’s stock shot up on the deal, making many investors re-feel Oracle is a serious player in AI infrastructure, not just “old guard.”

• The deal could reshape who powers the AI race (which cloud providers, how deals are made, who owns/operates where).

• It forces questions about sustainability (financial & environmental) as OpenAI expands extremely fast.

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xAI reportedly lays off 500 workers from data annotation team

Elon Musk’s AI startup, xAI, has cut about 500 jobs from its data annotation team. This is around one-third of the team. The change aims to cut back on generalist “AI tutors” and hire more specialist tutors.

Key Points:

• The job cuts affect xAI’s generalist AI tutor roles. These roles label, categorise, and contextualise raw data to train the chatbot Grok. These workers make up xAI’s largest team.

• Notice & compensation: Affected employees were informed by email. Their access to internal systems was removed immediately. They’ll receive payment until their current contracts end or until November 30, 2025, whichever is sooner.

• New focus: xAI is now prioritising expert AI tutors in areas like STEM, finance, medicine, and safety. The company plans to grow that team by ten times.

• Scale of impact: The layoffs represent about one-third of the data annotation team, which had ~1,500 members.

Why it matters:

• Shows how xAI is evolving: moving away from broad, general data work toward more specialized, higher-skill tasks.

• Shows a trend in the AI industry where companies focus on quality instead of quantity in human-in-the-loop processes.

• For workers, it’s a reminder of how quickly job roles may shift in AI companies, especially in support roles like annotation.

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Micro1, a competitor to Scale AI, raises funds at $500M valuation

Micro1, a startup rivaling Scale AI, has raised $35 million in a Series A round. This boosts its valuation to around $500 million. The company helps AI firms find and manage human contractors. These contractors label and train data, which is essential work for AI development.

Key Points:

• Strong revenue growth: Micro1’s annual recurring revenue (ARR) soared from $7 million in early 2025 to $50 million.

• Team and leadership: The funding round was led by 01 Advisors (co-founded by Dick Costolo and Adam Bain). Adam Bain is also joining Micro1’s board.

• Meta has invested heavily in Scale AI. This comes as AI labs like OpenAI and Google are cutting ties with Scale AI due to data privacy concerns. Micro1 aims to capture some of that demand.

• Focus on expertise: Micro1 is highlighting domain experts, not just general data annotators. These include specialists like doctors, writers, and senior engineers. They’re building tough recruitment and vetting systems to ensure quality.

• New tools & offerings: They built their own AI recruiting tool, called “Zara,” to interview and vet expert annotators. They’re also expanding into “environments” (simulated workspaces) for training AI agents.

Why it matters:

• There’s growing demand for high-quality labeled data with domain expertise, not just basic annotation. Micro1 fits well into that shift.

• The AI labs still need trustworthy and private data labeling providers. This is especially important after recent issues with sharing research or data. Companies like Micro1 can fill that need.

• Their rapid ARR growth and big valuation show strong market confidence, suggesting more investor heat in this segment.assistant Grok backed Altman. This went against Musk’s antitrust claims.

Read more

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How 433 Investors Unlocked 400X Return Potential

Institutional investors back startups to unlock outsized returns. Regular investors have to wait. But not anymore. Thanks to regulatory updates, some companies are doing things differently.

Take Revolut. In 2016, 433 regular people invested an average of $2,730. Today? They got a 400X buyout offer from the company, as Revolut’s valuation increased 89,900% in the same timeframe.

No wonder 10K+ everyday people are taking the chance on Pacaso.

Founded by a former Zillow exec, Pacaso’s co-ownership tech reshapes the $1.3T vacation home market. They’ve earned $110M+ in gross profit to date, including 41% YoY growth in 2024 alone. They even reserved the Nasdaq ticker PCSO.

The same institutional investors behind Uber, Venmo, and eBay backed Pacaso. And you can join them. But not for long. Pacaso’s investment opportunity ends September 18.

Invest While You Still Can

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