Oracle is reaping the rewards of OpenAI’s compute power spending spree

Oracle has secured a $300 billion contract with OpenAI to underpin the company’s surging compute requirements, marking the latest big win for the hyperscaler.

According to reports from the Wall Street Journal, the contract is set to commence in 2027 and will see Oracle expand the underlying infrastructure required to power OpenAI models.

This marks the latest in a string of deals struck by OpenAI to support future expansion as the firm scrambles to match skyrocketing power demands.

Compute power has been frequently identified as a key bottleneck for the company as it ramps up AI development.

Microsoft, OpenAI’s long-term partner and financial backer, has been a key player in supporting the firm through its Azure cloud computing service. But with reports of strained relations between Microsoft and OpenAI gaining traction in recent months, the latter has been looking elsewhere for industry support.

In June 2024, a deal between Oracle, Microsoft, OpenAI was announced to provide the latter with “additional capacity”. At the time, the company said this was to support “inference and other needs”.

Notably, the deal marked a huge shift away from Microsoft, which until that point had been OpenAI's exclusive cloud provider.

Similarly, earlier this year OpenAI and Oracle agreed to partner on the Stargate Project, a $500 billion initiative aimed at building out AI infrastructure across the United States.

Oracle is capitalizing on AI

Oracle is fast emerging as one of the big winners from the increasingly frantic generative AI race.

In its most recent earnings report, the company revealed it added upwards of £317 billion in future contract revenue, with OpenAI responsible for a huge chunk of this.

Shares surged following the earnings report and Larry Ellison’s personal wealth skyrocketed.

Elsewhere, the company has made significant gains in areas such as multi-cloud, again driven by surging AI demands. Enterprises globally are shifting to a hybrid or multi-cloud approach as a result of the generative AI race, and it’s a trend that Oracle has been keen to capitalize on.

At the Oracle CloudWorld Tour London conference in March this year, the hyperscaler announced an expansion of its multi-cloud relationship with Azure.

This followed confirmation of a similar partnership with AWS at its annual conference in Las Vegas just months prior.

High stakes for OpenAI

OpenAI’s blossoming relationship with Oracle doesn’t come without risk, however.

As sources told the WSJ, this is a deal that “far outstrips” the company’s current revenue, which is reported to stand at around $10 billion.

Under the terms of the agreement, OpenAI will essentially owe Oracle an average of $60 billion a year.

The deal also rests heavily on whether OpenAI’s current growth trajectory continues as it looks to draw more customers across both the enterprise and consumer markets.

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