OpenAI and Oracle: 300 billion deal for Project Stargate

While Donald Trump was publicly announcing Project Stargate, the construction of the AI infrastructure being built in Texas had long since begun. However, it was always questionable where the 500 billion US dollars that the project was to cost would come from. Now there is apparently a 300 billion dollar deal between OpenAI and Oracle that explains part of it.

The Wall Street Journal reports that the money is not to be invested directly in the development but rather in the purchase of computing power over five years. Oracle builds, OpenAI takes away. This means that OpenAI will have to raise around 60 billion US dollars a year.

The two companies had already announced a few weeks ago that they specifically wanted to build a data center with a capacity of 4.5 gigawatts. At that time, however, it was stated that not all parties involved in the Stargate project would be involved in the resulting data center. It is therefore ultimately unclear to what extent it will be part of the project. The Japanese tech group Softbank, Nvidia, and the investment fund of the ruling family of the United Arab Emirates, MGX, are also involved in the project. According to the WSJ, 4.5 gigawatts is about as much as four million households consume at the same time.

OpenAI and the financial situation

According to the report, the contract between OpenAI and Oracle is only valid from 2027, but how exactly OpenAI intends to generate the money remains questionable. The AI company is expected to generate a turnover of 12.7 billion US dollars this year. It was recently announced that there is also a contract worth 10 billion US dollars with Broadcom. Broadcom specializes in manufacturing customer-specific chips. Google and Meta also rely on Broadcom.

OpenAI has increased its cash consumption to 115 billion US dollars by 2029. The Information writes that the forecast is 80 billion US dollars higher than previously expected. Liquidity consumption of more than eight billion US dollars is expected this year alone—which is also 1.5 billion more than expected at the beginning of the year. Liquidity consumption—or cash burn—is a measure of how much available cash is needed to reach profitability.

When announcing Oracle's quarterly figures, CEO Safra Catz spoke of further contracts worth billions. Revenue therefore rose by 77 percent to more than 317 billion US dollars from future contract revenue. Oracle founder Larry Ellison is now said to have become one of the richest people in the world. However, the deal is also uncertain for Oracle. They have to make advance payments, provide chips, and rely on OpenAI being able to pay.

(emw)