Oracle has signed a five-year agreement to provide OpenAI with $300 billion worth of computing infrastructure starting in 2027, according to reporting by The Wall Street Journal.
The deal is one of the biggest cloud contracts ever recorded, and it completely overshadows OpenAI’s current yearly revenue of $10 billion.
This agreement will require 4.5 gigawatts of energy to power the planned infrastructure, an amount that could serve nearly four million homes or exceed the output of two Hoover Dams.
This development comes as OpenAI tries to break through the ceiling caused by a shortage of compute capacity, which has slowed down its product releases and model development.
With this new arrangement, OpenAI intends to build out massive new data centers, and it’s placing Oracle at the center of that expansion. The AI firm already attempted to fix the shortage through a joint venture with SoftBank, launching the Stargate data center initiative.
But that plan has seen minimal progress. The company now says Stargate includes all its data-center projects, and the Oracle contract is part of that branding.
Oracle’s stock jumps, Ellison’s net worth spikes $100B
Oracle revealed in its earnings for the quarter ending August 31 that it had locked in $317 billion in future contract revenue, which includes the OpenAI deal. Shares of the company shot up 42% on Wednesday after the announcement, Cryptopolitan reported.
Safra Catz, the company’s Chief Executive Officer, told analysts the new revenue came from three different contracts signed during the quarter. She didn’t identify the companies involved at the time.
That stock movement pushed Oracle co-founder and Chairman Larry Ellison into a new wealth bracket. His net worth jumped by over $100 billion, putting him close to Elon Musk on the global rich list. Ellison now sits on a personal fortune estimated at $400 billion, thanks in large part to the OpenAI contract.
But the deal comes with major risks. For OpenAI, it means paying an average of $60 billion per year, six times what it currently earns. The company is not yet profitable, and it’s placing a bet that its growth through ChatGPT will continue and lead to adoption across governments, companies, and billions of users.
For Oracle, it means placing a big chunk of its future income on a single partner. To meet its end of the bargain, Oracle will likely have to borrow money to acquire enough AI chips to build and power the required infrastructure.
For years, OpenAI had relied solely on Microsoft to deliver the compute it needed. But supply issues and growing frustration inside the company led to a change. OpenAI recently received waivers that allow it to seek new providers, clearing the way for Oracle to step in with a far bigger offer.
While the startup is still working through internal challenges like regulatory investigations and a fierce hiring market, the Oracle deal is its biggest step yet in scaling beyond Microsoft.
The contract assumes that OpenAI’s user base, model performance, and commercial reach will all grow significantly over the next decade. But with regulators in two U.S. states now reviewing its structure as a for-profit, and ongoing tensions with Microsoft, the next few years will test whether this bet pays off—or burns both companies.
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Source: https://www.cryptopolitan.com/oracle-openai-300b-supercomputing-deal/
