Oracle Lands Record US$300 Billion Cloud Deal With OpenAI

Oracle Surges on $300 Billion OpenAI Deal

Oracle (NYSE: ORCL) just shocked the market after its shares jumped 45 percent in a single day, adding US$100 billion to Larry Ellison’s fortune and briefly placing him ahead of Elon Musk. The catalyst was a US$300 billion contract with OpenAI to secure cloud computing power over the next five years, a deal that now stands as one of the largest in the history of the industry. For investors, this announcement is more than just a headline. It signals how AI spending is reaching unprecedented levels, with data center commitments stretching far beyond the current revenue of many players in the sector.

The excitement is undeniable, but it also raises difficult questions. Are these massive deals a sign of durable long-term growth or are we entering a period where expectations are running too far ahead of reality? History reminds us that moments like these can spark extraordinary wealth creation but also heighten risks if valuations overreach.

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Oracle Wins Landmark OpenAI Deal but Faces Revenue Concentration Risks

The Oracle contract will require an estimated 4.5 gigawatts of power capacity. To put that in perspective, Sydney’s peak electricity demand sits at roughly 5 gigawatts, meaning this single agreement would consume almost as much power as an entire major city. By comparison, Australia’s largest solar farm produces about 0.22 gigawatts, so it would take the output of around 20 such farms to meet this demand.

For Oracle, the deal adds approximately US$317 billion in future contract revenue beginning in 2027. While the scale of the agreement highlights the company’s growing role in AI infrastructure, it also raises questions about risk for both parties. OpenAI remains a loss-making business, which is not unusual for a high-growth technology firm, but the scale of its cash burn is concerning.

The company generates about US$10 billion in annual revenue, less than one-fifth of the roughly US$60 billion it will need to commit each year under this contract. For Oracle, the concentration of revenue in a single customer could create vulnerabilities, and the company may need to commit significant additional capital to secure enough chips to meet future demand.

Sam Altman Bets Big as AI Spending Sparks a Wall Street Debt Rush

Sam Altman has developed a reputation as an aggressive spender in the pursuit of advancing artificial intelligence. He has consistently pushed OpenAI to tackle some of the industry’s most complex challenges, from designing custom chips with Broadcom to exploring new consumer devices and pursuing the ambitious Stargate project, which carries an estimated cost of US$500 billion. Altman has also stated that OpenAI is unlikely to become profitable before 2029.

Between now and 2028, global spending on chips, servers, and data centre infrastructure is expected to reach USD 2.9 trillion, according to Morgan Stanley. To fund this massive buildout, technology companies are increasingly relying on external financing, tapping into what some on Wall Street describe as a modern-day gold rush for debt capital.