OpenAI has confirmed one of the largest cloud contracts ever signed, agreeing to purchase $300 billion worth of computing power from Oracle over the next five years. The agreement is part of Project Stargate, OpenAI’s sweeping initiative to build out massive AI data centre infrastructure in the US and abroad.
The two firms plan to construct 4.5 gigawatts of data centre capacity, roughly the output of two Hoover Dams or the electricity usage of four million US homes. While rivals such as Amazon, Microsoft, Google, and Meta have pledged to spend a combined $300 billion on AI centres this year, OpenAI’s single agreement with Oracle already surpasses the industry’s largest individual commitments.
A high-stakes gamble
For Oracle, the partnership has already boosted fortunes. The company’s stock price jumped by more than 40% after reporting $317 billion in new contract revenue last quarter, with OpenAI now revealed as one of the three customers driving that surge. Founder Larry Ellison’s net worth swelled by over $100 billion, placing him neck-and-neck with Elon Musk among the world’s richest. But Oracle is heavily concentrating its future on a single client, one that is not yet profitable.
OpenAI’s finances highlight the scale of the gamble. The company currently generates around $10 billion in annual revenue, far short of the $60 billion average it will spend each year under this deal. Reports suggest it could burn through $44 billion before turning a profit, a milestone CEO Sam Altman does not expect before 2029. To mitigate dependence on Microsoft, its primary backer and cloud partner, OpenAI has sought alternative arrangements, making Oracle a crucial ally.
Project Stargate and global expansion
Project Stargate, first unveiled at the White House alongside President Donald Trump, Oracle CTO Larry Ellison, and Sam Altman, envisions at least $500 billion in AI data centre spending. Construction has already begun in Abilene, Texas, with additional facilities planned in Wyoming, Pennsylvania, Michigan, and New Mexico. Oracle is working with Crusoe Energy on several of these sites.
The venture extends beyond U.S. borders. OpenAI, Oracle, SoftBank, and Emirati investment firm G42 are collaborating on a mega data centre project in the United Arab Emirates. A unique financing clause ensures that every dollar G42 invests abroad is matched by equivalent funding for US facilities.
Still, the financial strain is evident. Oracle’s debt-to-equity ratio stands at an eye-watering 427%, compared with just 32% for Microsoft. The company will likely need to borrow heavily to purchase the AI chips required for its new infrastructure.
The bigger picture
OpenAI’s bold contract reflects both confidence in AI’s future and the pressure of global competition. With rivals like Google, Anthropic, and Meta advancing rapidly, and with its relationship with Microsoft becoming increasingly fraught, OpenAI is betting that ChatGPT’s explosive adoption will expand into a vast ecosystem used by billions of people worldwide.
OpenAI is committing to infrastructure on a scale larger than its current revenues can sustain, while Oracle is tying a huge portion of its future to one ambitious, loss-making partner. If the gamble pays off, both companies will cement themselves as central players in the AI era. If not, the costs may reshape Silicon Valley’s appetite for megadeals.
