OpenAI has just delivered a headline by announcing a huge 300 billion dollar cloud computing contract with Oracle, establishing what could be the largest technological alliance in history, and establishing the possibility of an AI infrastructure arms race that could transform how artificial intelligence is built and implemented around the world.
A major 5-year computing capability deal has been uncovered
According to Built In, OpenAI formed a partnership with Oracle, where they agreed to purchase 300 billion of computing power in the next five years. The deal is an extension of the data center business, Stargate, of the artificial intelligence giant. Although OpenAI had announced its collaboration with Oracle already in July, the value of the contract was first disclosed on Wednesday.
That transaction will begin in 2027 when OpenAI will be profitable in 2029, according to the WSJ article. The generative AI giant has been faced with a challenge that has complicated the rollout of its products, and that is a major shortage of computers. Nevertheless, it is hoped that more businesses and governments worldwide will adopt ChatGPT and continue to do so as it seeks to develop its data center project.
Infrastructure is growing as a result of unprecedented power demands
The new contract will have a power capacity of 4.5 gigawatts, which is about the power taken up by 4 million homes, as indicated in the article. Oracle is collaborating with Crusoe and other data center firms to establish centers in the country in various states such as Wyoming, Pennsylvania, Texas, Michigan, and New Mexico.
According to The Verge, OpenAI and Oracle agreed to acquire $300 billion worth of computing power in the course of approximately five years, which is among the biggest cloud computing deals to date. In July, the two companies unveiled their collaboration to construct data centers worth 4.5 gigawatts of power as part of the larger Stargate initiative they declared with the backing of Softbank and President Trump, without clarifying how much of the data centers OpenAI intended to finance.
Oracle is on a financial boon, as a result of which its stock is soaring
The other $10 billion deal with semiconductor giant Broadcom to design its own AI chip may also be the brainchild of OpenAI, which will presumably generate $12.7 billion in revenue this year. As it presented quarterly earnings on Tuesday, Oracle CEO Safra Catz declared that three undisclosed businesses had signed four multi-billion-dollar contracts in the first quarter, a trend that she claimed is raising Oracle’s cloud infrastructure earnings by 77 percent in 2021.
In general, the company announced that during the first quarter, it increased its future contract revenue by over $317 billion, an enormous dollar amount that propelled its shares skyrocketing and Chairman Larry Ellison to the pinnacle of the world’s most successful person ranking. Oracle could not have had better timing to establish itself as a big contender in the AI infrastructure arena.
Competition in the AI industry
The acquisition places OpenAI in a good position to compete with other AI giants such as Google and Microsoft, which have their own giant cloud infrastructure. The collaboration also demonstrates the desperation that AI companies have regarding computing power- they are ready to spend hundreds of billions of dollars, years in the past, just to get some capacity.
In the case of Oracle, the arrival of OpenAI as a client confirms its strategy of cloud and places it in direct competition with Amazon Web Services and Microsoft Azure. This $300 billion investment shows that OpenAI believes in its future expansion opportunities despite the uncertainty surrounding the time AI companies become profitable. It is a big future bet, on artificial intelligence, one that may or may not turn out to be a great success story or end up being a warning about the power of hype in AI.