OpenAI will pay Oracle $300 billion over the course of five years to fuel Sam Altman’s AI ambitions by providing five gigawatts of compute capacity.
At least that’s what unnamed sources familiar with the matter tell the Wall Street Journal, which reports that the contract is set to begin in 2027, giving the AI startup a little over a year to figure out how or perhaps who’s going to be left holding the bill when it falls due.
As it stands, OpenAI can’t afford the checks it’s writing. As of June, the AI flag bearer has annual recurring revenue of $10B. To be clear, that’s revenue. The company isn’t expected to turn a profit until at least 2029. Perhaps SoftBank is about to open its wallet after reportedly agreeing to chip in $19B to the OpenAI-led Stargate project that aims to build a series of giant AI Datacenters.
Today’s news comes just over a month after OpenAI announced that Oracle had agreed to furnish it with an additional 4.5 gigawatts of compute capacity, bringing its total compute commitment to 5 gigawatts, enough for two million additional GPUs. At the time, we estimated the cost of those GPUs at nearly $100 billion. However, that figure doesn’t take into consideration the cost of the facilities and power plants necessary to support all those chips, and assumed OpenAI and friends would be paying today’s prices for them.
As we reported last week, OpenAI will reportedly begin fielding its own in-house silicon developed in collaboration with Broadcom, which may also factor into its cost analysis.
While it remains to be seen how exactly OpenAI plans to pay its bills, it seems that Oracle’s CTO and Founder Larry Ellison is already reaping the benefits of the arrangement. On Tuesday Ellison inched closer to overtaking Elon Musk as the world’s richest man after the database giant turned GPU slinger’s share price surged more than 30 percent in after hours trading.
Driving that rally was a fat pipeline of purchase commitments that jumped 359 percent to $455 billion. CEO Safra Catz predicted sales will continue to grow over the next year. By 2031, Oracle expects its cloud infrastructure biz to crest $144 billion in annual revenues, up from $18 billion this year.
The thing about purchase commitments is they’re only as good as the customer who’s making them. When Microsoft or Google say they’re going to spend $80 billion or more a year on AI infrastructure they’re probably good for it. The guy whose company is bleeding cash while boasting about spending $500 billion on AI datacenters with no obvious way to pay for them? Maybe wait for the check to clear before counting your profits.
In any case, Oracle’s revenue outlook suggests that either OpenAI isn’t the only mega customer the aspiring cloud provider is courting or that the AI trend setter’s $300 billion contract will be implemented in progressively larger phases tied to customer and revenue growth.
The Register sought comment from Oracle and OpenAI; we’ll let you know if they respond. ®
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