- Openai signs $ 300 billion oracle contract that starts in 2027 to expand the AI capacity
- Oracle shares jump over 40 percent after reporting $ 317 billion in future revenue
- Deal raises risks as Openai loses money and Oracle takes heavy debt
Openai has signed a contract with Oracle to buy $ 300 billion dollars of computing power over the next five years, according to Wall Street Journal.
This makes it one of the biggest cloud deals ever hit.
The contract begins in 2027 and is expected to reshape how Openai builds and runs its artificial intelligence models.
A huge gamble
The agreement requires 4.5 gigawatt power capacity, which is enough electricity to deliver about four million homes.
It shows how the urgency of building AI data centers drives new heights in technology costs, even when questions remain above whether demand will justify such obligations.
In its latest earnings report, Oracle revealed that it added $ 317 billion in future contract revenue during the quarter, which ended August 31, partly because of the Openai agreement.
The news sent Oracle shares that increased by more than 40 percent in a single day. This wave increased the Oracle President Larry Ellison’s fortune by more than $ 100 billion and saw him overtake Elon Musk as the world’s richest person with a net worth close to $ 400 billion.
However, the trade is not without massive risk to both parties.
For Openai, the agreement gives a new source of computing power after years of relying exclusively on Microsoft’s Azure Cloud, but WSJ Says the company reporting about $ 10 billion in revenue this year, Oracle owes an average of $ 60 billion a year under the agreement.
The startup loses money and has told investors that it does not expect to make a profit until 2029.
Oracle, meanwhile, will have to borrow strongly to finance AI chips and infrastructure needed to deliver the contract.
Plus, as WSJ Reported, “The trade rests on the assumption, Chatgpt will continue its explosive growth and be adopted by billions of people around the world as well as larger businesses and governments.”
Industrial analysts say the partnership emphasizes both the promise and strain of AI boom. Costs of chips, servers and data centers around the world are expected to reach $ 2.9 trillion by 2028.
Whether Openai’s growth can keep up with its obligations remains an open question.
