OpenAI signed a $300 billion cloud computing contract with Oracle that dwarfs the artificial intelligence (AI) company’s current revenue, creating one of tech’s riskiest financial gambles as the startup races to secure computing power for its AI ambitions.
The five-year deal requires OpenAI to pay Oracle an average of $60 billion annually starting in 2027. That’s six times more than OpenAI’s current $10 billion yearly revenue, according to the Wall Street Journal.
OpenAI expects to lose $44 billion before turning its first profit in 2029, CEO Sam Altman told investors last fall. The company now faces the challenge of funding a contract that far exceeds its financial capacity.
Oracle’s stock surged 43% Wednesday after announcing $317 billion in new future contract revenue, largely from this deal. The spike pushed Oracle Chairman Larry Ellison’s wealth past $400 billion, putting him in range of Elon Musk as the world’s richest person.
“We signed four multi-billion-dollar contracts with three different customers in Q1,” Oracle CEO Safra Catz told analysts, without naming OpenAI directly.
The agreement will provide 4.5 gigawatts of computing power. That’s equivalent to the electricity produced by two Hoover Dams or enough to power 4 million homes.
OpenAI previously relied only on Microsoft Azure. The company recently gained permission to find additional providers because Microsoft couldn’t meet their growing needs.
The deal extends beyond simple cloud services. Oracle will work with data-center builder Crusoe to construct facilities across Wyoming, Pennsylvania, Texas, Michigan, and New Mexico. A separate major data center is planned for the United Arab Emirates.
The contract is part of Project Stargate, a $500 billion infrastructure initiative OpenAI announced with SoftBank and President Trump in January. OpenAI has secured commitments covering more than half that ambitious goal.
The financial strain extends to Oracle as well. The company carries a debt-to-equity ratio of 427%, compared to Microsoft’s 32.7%. Oracle’s capital expenditures of $27.4 billion last year already exceeded its $21.5 billion operating cash flow.
OpenAI is likely to rely on external funding sources, such as SoftBank, and debt financing to cover its costs. SoftBank reportedly committed $19 billion to the Stargate project.
The deal assumes that ChatGPT will continue to grow rapidly and attract billions more users. OpenAI faces mounting pressures, including expensive talent wars, tense negotiations with Microsoft, and regulatory reviews of its planned for-profit restructuring.
Construction has already begun on the first Stargate data center in Abilene, Texas. The contract officially starts in 2027, giving OpenAI just over a year to arrange financing for history’s largest cloud computing commitment.