OpenAI has signed a $300 billion contract with Oracle to purchase computing power over the next five years, marking one of the largest cloud deals in history. The agreement, which begins in 2027, represents a massive bet on AI’s continued growth while highlighting the extraordinary financial risks both companies are taking in the artificial intelligence race.
What you should know: The deal requires unprecedented power and financial commitments that could reshape both companies’ futures.
- The contract will consume 4.5 gigawatts of power capacity—enough electricity to supply about four million homes.
- OpenAI will owe Oracle an average of $60 billion annually under the agreement, despite reporting only $10 billion in revenue this year.
- The company is currently losing money and doesn’t expect to turn a profit until 2029.
Market impact: Oracle’s stock soared more than 40% in a single day following the announcement, creating massive wealth shifts.
- Oracle disclosed $317 billion in future contract revenue during the quarter ending August 31, partly due to the OpenAI deal.
- The surge increased Oracle Chairman Larry Ellison’s wealth by over $100 billion, making him the world’s richest person with a net worth close to $400 billion.
- Ellison overtook Elon Musk, the Tesla CEO, in the global wealth rankings.
The big picture: This partnership underlines both the promise and strain of the AI boom as companies make unprecedented infrastructure investments.
- Global spending on chips, servers, and data centers is projected to reach $2.9 trillion by 2028.
- The deal assumes ChatGPT will continue explosive growth and be adopted by billions of people worldwide, plus major businesses and governments.
- Oracle will need to borrow heavily to finance the AI chips and infrastructure required to deliver the contract.
Why this matters: The agreement represents a strategic shift for OpenAI away from exclusive reliance on Microsoft’s Azure cloud while creating massive financial obligations that hinge on sustained AI adoption growth.
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