OpenAI struck a five-year deal with Oracle (NYSE:ORCL) to purchase $300 billion of computing power. The contract reflects continued artificial intelligence frenzy, even as concerns of a bubble mount.
The partnership, which will begin in 2027, requires 4.5 gigawatts of power capacity, equivalent to more than two Hoover Dams, the Wall Street Journal reported on Thursday.
OpenAI views the deal as critical to overcoming computing shortages that limit the rollout of its products and training new models. Oracle, meanwhile, disclosed it had secured $317 billion in future revenue commitments during the most recent quarter, sending its stock up more than 40%.
Also Read: Oracle’s Exceptional Backlog Confirms Its Role As Key AI Enabler: Analyst
OpenAI, once reliant exclusively on Microsoft (NASDAQ:MSFT) for computing resources, gained the flexibility to seek additional providers after grappling with supply crunch. By tying itself to Oracle, the startup strengthens its Stargate data center initiative, which aims to solve the scale problem constraining AI progress.
Oracle plans to partner with Crusoe and other builders to construct data centers in multiple U.S. states, including Wyoming, Texas, Pennsylvania, Michigan, and New Mexico.
The stock market has rewarded Oracle’s aggressive push into cloud infrastructure. Shares have risen more than 97% year-to-date, far outpacing the NASDAQ Composite Index’s 13% gain. It just made itself look like the next Nvidia (NASDAQ:NVDA), for better or worse.
The company stunned Wall Street by tripling its remaining performance obligations to $455 billion and projecting cloud infrastructure revenue of $114 billion by fiscal 2029, fueled by huge AI contracts with players like OpenAI, the Wall Street Journal reported.
However, the partnership also has its share of challenges. OpenAI disclosed roughly $10 billion annual revenue, far below the $60 billion per year it must pay under the contract. With a heavier debt load than rivals like Microsoft or Amazon.com (NASDAQ:AMZN), Oracle will likely borrow heavily to acquire the AI chips powering these centers.
ORCL Price Action: Oracle stock is trading higher by 2.03% to $335.00 premarket at last check Thursday.
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