In the future, every government will likely desire to establish a "sovereign" AI cloud, according to Oracle's Larry Ellison.

• Larry Ellison, the chairman and chief technology officer of Oracle, stated on a recent earnings call with Wall Street analysts that "almost every government" desires a sovereign cloud.
• Oracle cloud technology has played a role in streamlining legal reviews for Albania's EU membership and expanding internet access in rural areas through partnerships with Starlink, founded by Elon Musk.
• While governments are moving towards digitization and cloud services, experts believe that certain critical functions such as defense, taxes, and healthcare cannot be fully automated.

Oracle, like every other tech company, is emphasizing its AI potential. However, during an earnings call in March, Larry Ellison presented a future market opportunity that investors might not typically consider, which is centered on a significant customer that is not a Fortune 500 company.

The Oracle founder, former CEO, and current chairman and CTO predicts that national and state governments will increasingly use platforms like Oracle Cloud Infrastructure for their applications, and this trend is already evident in various ways.

"Ellison stated, "For the first time, we're beginning to win business for countries. We have a number of countries where we're negotiating sovereign regions with the national government.""

Government contracts for cloud services are highly sought after by major tech companies, and Microsoft and Amazon have a history of competing for such deals. In 2022, both companies, along with Oracle and Google, were awarded a $9 billion contract by the Department of Defense.

Ellison predicted that governments would want their own sovereign cloud and dedicated region during an earnings call with analysts.

Oracle, in collaboration with Nvidia and Microsoft, has leveraged cloud technology to streamline regulatory compliance for countries. For instance, Ellison mentioned Albania as an example of a country utilizing chatGPT, a generative AI tool, to decipher and summarize its laws and identify areas for improvement in order to align with E.U. regulations.

""Serbia took eight years to align their laws to join the E.U., and Albania is currently facing the same challenge, but with generative AI, we can harmonize their laws with the EU in approximately 18 months to two years," Ellison stated."

Some analysts doubt that Ellison's speech was anything more than a typical C-suite pep talk for a crucial business unit. Despite Oracle's shares increasing by 21% YTD, Barclays analyst Raimo Lenschow expressed worry about the slower growth of OCI, which could cause concern among investors as it is the primary investment story.

Government efficiency can be improved through the use of cloud services and artificial intelligence-powered solutions, as Ellison stated. Initially, the focus is on reducing redundancy in the event of disasters and disaster recovery. However, the government is also expanding its efforts to include health care information and internet access projects.

In Kenya and Rwanda, countries are utilizing Oracle Cloud Infrastructure and generative AI to automate healthcare processes and map rural farms for nutrient analysis. These AI-assisted maps help farmers plan their agricultural output and predict markets, logistics, and agricultural output.

Ellison mentioned that there are many new AI applications that are not commonly known, such as food security, rural school and hospital internet access. He stated this after working on them for the past 12 months and delivering them.

He also discussed the automation of vaccination programs and other healthcare programs "across the board."

"According to Dan Gardner, CEO of Code and Theory, the future belongs to data and information, which is like the gold of our time. If the government can access and act on that data quickly, why would we want to slow it down? We want it to be as efficient as possible. Most of this is related to mundane human resources, and those people could be doing something else that is much more valuable."

Rural areas could benefit from cloud and generative AI applications that provide internet access, increasing educational opportunities and economic value, as well as providing citizens with greater insight into government processes, according to Tapan Parikh, Cornell University associate professor. Technology has the potential to make bureaucracies more efficient or transparent internally, he said.

'Black Mirror' governments

The push to move government processes to the cloud is opening the door to new risks, especially as countries trust newly developed generative AI systems. While these systems 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.

"Garder stated that while there are concerns about the "Black Mirror" side of technology, such as Big Brother, data wars, and AI warfare, the potential benefits of AI in terms of efficiency and crop productivity are significant."

AI raises a host of concerns.

Gardner highlighted the growing prevalence of more generative content during election years worldwide and the associated issues related to tech-enabled interference. "Perhaps it's not just about chips on the ground. It's about data security, verifying identity, government systems, content viewing, financial connections, and AI governance. The use of AI as a destructive tool is truly terrifying."

"Simone Bohnenberger, chief product officer at cloud company Phrase, believes that no big government can afford to move all of their services, especially critical ones like defense, taxes, and health care, completely into the cloud and into the hands of gen AI. She believes that it is not responsible to do so as the potential risks outweigh the benefits. OpenAI, which created ChatGPT, is mostly trained on existing content on the internet, which could pose a problem, especially when text from lesser-known languages like Albanian needs to be analyzed. Bohnenberger said that Albanian is a minority language and there is not much data available to train a model on, which could result in messy outputs."

Allowing foreign companies access to citizen data poses security and data risks, as demonstrated by the U.S.'s vulnerability to data hacks, including a recent 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. Parikh expressed concern about this issue, stating, "I think certainly that's a concern going forward for countries who are working with vendors from different countries."