OpenAI is set to pay Oracle $30 billion annually for data center services

OpenAI and Oracle's $30B annual data center deal boosts Oracle's stock and Ellison's wealth.

: OpenAI has signed a monumental agreement with Oracle worth $30 billion a year to utilize Oracle's data center services. This landmark agreement has been confirmed by OpenAI CEO Sam Altman, although he did not disclose the dollar amount. Oracle's filing with the SEC revealed a cloud deal generating $30 billion annually, sparking a significant increase in Oracle's stock price and elevating Larry Ellison to the second richest person in the world. OpenAI explained the arrangement includes 4.5 gigawatts of capacity, comparable to the output of two Hoover Dams, as part of a collaborative data center project named Stargate, alongside SoftBank.

OpenAI's decision to engage Oracle for data center services is one of the most significant tech deals, valued at $30 billion annually. This agreement forms part of a larger $500 billion Stargate project, intended to boost OpenAI's computing capacity with considerable energy requirements comparable to two Hoover Dams. While the contract includes OpenAI, Oracle, and SoftBank's joint efforts, the $30 billion deal itself does not involve SoftBank directly. According to OpenAI CEO Sam Altman, this deal is crucial for their data processing capabilities, though he has withheld certain financial disclosures.

The financial disclosure surrounding Oracle's stock and the identity of the customer led to speculation, significantly affecting Oracle's market value. This deal subsequently propelled Oracle's founder Larry Ellison to the status of the world’s second wealthiest individual. The $30 billion contract is notable, especially when juxtaposed against the $24.5 billion generated by Oracle's cloud services across its entire client base as of fiscal 2025.

The deal, as confirmed in OpenAI's blog post, entails massive data center construction efforts in Abilene, Texas, at Stargate I site. The collaboration involves an immense amount of energy resources, underscoring the project's size and ambition. Moreover, Oracle has announced a significant increase in its capital expenditures, over $20 billion already spent and $25 billion expected for further infrastructure expansion, which serves not only OpenAI's requirements but also the demands of Oracle's existing client roster.

OpenAI’s recent financial achievements, reaching $10 billion in annual recurring revenue, underscore the organization's rapid growth. However, this agreement highlights the company's substantial financial commitments, which are triple the current revenue and exclude further operational expenses. This financial strategy implies long-term investment in infrastructure to sustain and expand their technological and operational capabilities, essential for continued innovation in AI.

The data center partnership also underlines Oracle's strategic positioning to expand its role in the cloud industry, serving as a pivotal provider for highly specialized and resource-intensive needs like those of OpenAI. The ramifications of this integration are poised to herald shifts in the landscape of cloud services and artificial intelligence, emphasizing the importance of synergistic collaborations in driving technological growth.

Sources: The Wall Street Journal, Bloomberg, TechCrunch

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