In a major development in the cloud computing space, Oracle (ORCL) has inked a massive $300 billion deal with OpenAI, the Wall Street Journal reported. The five-year agreement is set to begin in 2027, marking one of the largest cloud contracts in history. Also, it positions ORCL as a key infrastructure provider for OpenAI’s growing AI needs, marking a shift away from relying on Microsoft (MSFT) Azure.
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The news comes as Oracle stock soared as much as 40% on Wednesday, its biggest single-day rally since 1999. Investors are bullish on its future, with the company projecting cloud infrastructure revenue to hit $18 billion this year, and potentially $144 billion by 2029.
Following this rally, co-founder Larry Ellison saw his net worth surge by $88 billion, making him the world’s richest person.
OpenAI Turns to Oracle for Massive AI Compute Power
Under the deal, OpenAI will purchase compute power from Oracle, using its expanding network of AI-focused data centers. The deal requires a huge 4.5 gigawatts of power, which is about as much as two Hoover Dams or enough to power four million homes.
Oracle’s infrastructure, known for its enterprise-grade reliability and cost efficiency, is expected to support OpenAI’s most advanced models and future innovations.
This deal would significantly expand the existing relationship between the two companies. OpenAI began using Oracle’s cloud infrastructure in 2024. Also, it aligns with the $500 billion Stargate initiative, a joint effort by OpenAI, Oracle, and SoftBank (SFTBY) to build domestic data centers and supercomputing hubs.
High-Stakes Gamble for Both Companies
The agreement is a risky bet for both parties, WSJ said. OpenAI, a startup that is still losing money, is expected to spend $60 billion a year for this deal. This is far more than the $10 billion in revenue it disclosed in June.
For Oracle, the deal means concentrating a major portion of its future revenue on a single customer. To fulfill the contract, the company will likely need to take on additional debt to acquire the specialized AI chips required to power the new data centers.
Is Oracle a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ORCL stock based on 26 Buys and nine Holds assigned in the past three months. Further, the average ORCL price target of $311.40 per share implies 5.16% downside risk.
