Oracle’s Larry Ellison thinks every government will want to build a ‘sovereign’ AI cloud in the future

Every tech company is talking up its AI opportunity. Oracle is no exception. But during an earnings call in March, Oracle’s Larry Ellison laid out a future market opportunity focused on a major customer that investors may think about less often that Fortune 500 companies.

The Oracle founder, former CEO and current chairman and chief technology officer, sees national and state government applications being run on platforms like Oracle Cloud Infrastructure to a much greater degree than today, and indicated that it’s starting to happen in a variety of ways.

“We talk about, you know, winning business with companies. For the first time, we’re beginning to win business for countries,” Ellison said. “We have a number of countries where we’re negotiating sovereign regions with the national government.”

Major tech companies vying for massive government contracts in the cloud are nothing new. Microsoft and Amazon had a lengthy battle over a cloud deal with the Department of Defense, and both those AI players as well as Oracle and Google ended up all in on a $9 billion DoD contract in 2022.

But Ellison went further in his prediction when speaking with analysts on the recent earnings call, saying “Every government, pretty much every government, is going to want a sovereign cloud and a dedicated region for that government.”

Oracle, which works with Nvidia and Microsoft on generative AI capabilities, has already helped use cloud tech to cut red tape for countries. One example Ellison gave was Albania. It is trying to ascend to the European Union with the help of chatGPT, with the generative AI helping to decipher and summarize its laws and aid the country in what it needs to change in order to be compliant with E.U. regulations.

“It took Serbia eight years to harmonize their laws to be able to join the E.U.,” Ellison said. “Albania is facing the same thing, but with generative AI, we can read the entire corpus of the Albanian laws and actually harmonize their laws with the EU in probably more like 18 months to two years.”

Some analysts are skeptical of Ellison’s talk as being anything more than typical C-suite rallying for a key business unit. Oracle shares are up about 21% YTD, but Barclays analyst Raimo Lenschow expressed concern about lower OCI growth during its latest earnings, which could “worry investors, as this is the main investment story.”

A version of future featuring cloud services and artificial intelligence-powered solutions can make government more efficient. Ellison said for starters, redundancy is a focus for government, in the case of disaster and disaster recovery. But it’s also moving into health care information and internet access projects.

Countries including Serbia are standardizing on Oracle Cloud Infrastructure and using generative AI for processes like automating health care. Deals related to delivery of internet services in partnership with Elon Musk’s Starlink to remote areas are taking place in Kenya and Rwanda, where OCI and Starlink are mapping rural farms to see which crops are growing in what area, and if they are getting enough nutrients like nitrogen and water.

“These maps are AI-assisted, help them plan their agricultural output and predict their agricultural output, predict markets, the logistics of the agricultural output, doing all of all of those things as next-generation national applications,” Ellison said.

Food security, rural school and rural hospital internet access, are other examples of what Ellison said are among the “all sorts of interesting new AI applications out there that you’ve probably never heard of before, at least I hadn’t heard of before until these last 12 months now that we’ve worked on and we’re now in the process of delivering.”

He also mentioned automation of vaccination programs, and other healthcare program “across the board.”

“We’re living in a world where like data and information is the gold of the future,” said Dan Gardner, CEO of digital strategy agency Code and Theory. “If the government can get access and action on that their data faster, why would we want to slow that down? We want that to be as efficient as possible. A lot of that is like mundane human resources, that maybe those people could be doing something else that is way more valuable.”

Cloud and generative AI applications allowing countries to give rural areas internet access could increase educational opportunities and create more economic value. It could also allow citizens to have more insight into government processes, said Tapan Parikh, Cornell University associate professor. “One thing technology’s always been good at is potentially making bureaucracies more efficient, or at least more transparent internally,” he said.

‘Black Mirror’ governments

But the push to move more government processes to the cloud is also opening the door to new risks, especially as countries trust newly developed generative AI systems. While they may make processes faster than ever, there are bound to be mistakes as the technology develops and could make citizen data accessible to cyber criminals.

“We shouldn’t use these technologies as an excuse to not maintain oversight and control over political processes,” Parikh said. “Certainly, I think that’s a very important thing, particularly when you’re dealing with countries that may not have the same kind of governance capacity.”

Oracle did not respond to a request for additional comment on Ellison’s earnings call discussion.

“There’s the ‘Black Mirror’ bad side of it: Big Brother, data wars, AI warfare and all that stuff,” Garder said. “As far as like removing red tape and being more efficient and getting better use out of crops across the country, that’s incredible. That’s the multiplier of humanity that could really improve because of AI.”

AI raises a host of concerns.

Gardner pointed to the proliferation of more generative content in an election year around the world and all the issues related to tech-enabled interference. “Maybe it’s not like chips on the ground. But it’s data security, authentication of who you are, who governments are, what content you’re viewing, all the connection points between financial systems, and AI governance. Using AI as a tool of destruction is quite scary.” 

“No big government in the world can afford to move all of their services and especially critical ones like defense, taxes, health care, completely into the cloud and into the hands of gen AI,” said Simone Bohnenberger, chief product officer at cloud company Phrase. “It’s just not in the realm of, I think it’s not responsible to do that. The potential risks outweigh the benefits of doing that.”

OpenAI, which created ChatGPT, is mostly trained on existing content on the internet. That could pose a problem, especially when text from lesser known languages like Albanian need to be analyzed, Bohnenberger said.

“If you look at the World Wide Web or the internet, the vast majority of content there’s English, I think a quarter of the content is English, followed by Chinese,” she said. “Albanian is a minority. It’s very questionable for me how well that actually works for a small country like Albania and like an outlier language, because there’s just not much data you can train a model on. And if you don’t have much data, then the outputs will be very messy.”

Then there’s security and data risks with allowing foreign companies access to citizen data, Parikh said. Even the U.S., with all its resources, has been vulnerable to data hacks, including a recent February incident with contractor CGI Federal which exposed personally identifiable information on employees. The recent battle between the U.S. and China over TikTok is an example of how control of sensitive consumer data can be interjected into geopolitics. “I think certainly that’s a concern going forward for countries who are working with vendors from different countries,” Parikh said.