OpenAI turns to Oracle in historic $300 billion cloud partnership

OpenAI has struck a landmark deal with Oracle to buy $300 billion in computing power over five years, highlighting both the explosive rise of AI and the growing financial risks around it. People familiar with the matter told The Wall Street Journal that the contract – one of the largest cloud deals ever signed – will take effect in 2027.

The contract dwarfs OpenAI’s current annual revenue of about $10 billion, committing the startup to an average of $60 billion per year for cloud services. The scale of the deal highlights the company’s financial strain. OpenAI told investors last year it doesn’t expect to turn a profit until 2029 and could rack up as much as $44 billion in losses before then.

The deal also underscores the enormous energy demands of training and deploying AI systems. Oracle’s work with OpenAI will require 4.5 gigawatts of electricity capacity – roughly the output of two Hoover Dams, or enough to power four million homes.

Oracle CEO Safra Catz told analysts the company’s cloud pipeline reflects unprecedented demand. In a filing earlier this summer, Oracle hinted at the OpenAI contract by disclosing a cloud services deal expected to generate more than $30 billion in annual revenue starting in 2027.

The contract comes as OpenAI struggles with a persistent shortage of computing capacity, slowing new product rollouts and delaying next-generation AI models. The challenge extends across the industry, with tech firms racing to build data centers and secure advanced chips.

OpenAI has pursued several initiatives to expand its computing capacity. It struck a deal with Broadcom to develop custom chips and partnered with SoftBank on a major venture called Stargate, its umbrella for data center expansion. Stargate stumbled early, and OpenAI now considers the Oracle partnership part of that broader effort.