OpenAI’s whopping $300 billion, five-year deal to buy computing power from Oracle Corp. has sparked yet another debate on whether artificial intelligence (AI) continues to benefit from a boom or is bracing for a bust.
The mega-deal, one of the largest in cloud-computing history, signals sky-high spending on AI data centers is far from over despite growing worries over a potential bubble. The total amount eclipses OpenAI’s annual revenue when it starts in 2027, according to The Wall Street Journal, which broke the news Wednesday.
News of the deal immediately sent Oracle shares soaring 36% to a record high, adding $100 billion to the personal fortune of Oracle Chairman Larry Ellison to about $400 billion, putting him in the same financial stratosphere as Elon Musk, the world’s richest man.
Under terms of the agreement, Oracle will generate 4.5 gigawatts of power capacity – the electricity equivalent of more than two Hoover Dams or amount consumed by four million homes.
“The $300 billion OpenAI-Oracle deal proves AI is now the world’s new economic engine,” said Steve Lucas, CEO of Boomi, an enterprise AI and automation provider that specializes in agents. “But without modern integration and data governance, enterprises can’t tap its true potential. CIO’s need to bet on data first.”
By any measure, the contract is a risky proposition for both companies, who are pilot members of Stargate Project, a $500 billion initiative to build data centers in the U.S. over the next four years.
OpenAI is hemorrhaging money. Its annual revenue is roughly $10 billion, or one-sixth of what it will owe Oracle in yearly payments ($60 billion) over the next five years, starting in 2027.
OpenAI CEO Sam Altman also is tackling a host of business challenges that range from creating an iPhone competitor via designer Jony Ive’s io to building custom chips with Broadcom, and the Stargate Project. Last fall, he told investors OpenAI won’t turn a profit until 2029, and expects to lose $44 billion before getting there, The Wall Street Journal reported.
Conversely, Oracle will more than likely must take on some debt to buy the AI chips necessary to power the data centers.
For now, Oracle is reaping the benefits of the deal, an accord it says will pump up its cloud revenue to $144 billion by its 2030 fiscal year. The Silicon Valley company previously predicted less than $20 billion for that business in its current fiscal year.
“Oracle is taking off based on several years of building for AI,” Futurum Group CEO Daniel Newman said on Fox Business. “Oracle will be successful in this AI pivot.”
Added Armando Franco, director of modernization for TEKsystems Global Services, which advises Fortune 500 companies on cloud and AI projects: “The narrative around artificial intelligence feels eerily similar to the dot-com era with rapid investment, sky-high expectations and a flood of entrepreneurs racing to stake their claim. After the dot-com crash, the internet didn’t vanish. Instead, it matured and ultimately powered the world’s most valuable companies.”
