Oracle Stock Surges 5% on 4.5GW OpenAI Data Center Deal

Oracle Corporation has secured a significant deal with OpenAI, agreeing to lease approximately 4.5 GW of data center power capacity in the United States as part of the "Stargate" project. This collaboration aims to expand the infrastructure for artificial intelligence, with Oracle committing to build additional data centers across multiple states. The agreement includes plans to nearly double the capacity of the existing data center in Abilene, Texas, from 1.2 GW to approximately 2 GW. Furthermore, Oracle is considering the construction of new data centers in states such as Michigan, Wisconsin, Wyoming, New Mexico, Georgia, Ohio, and Pennsylvania.

The "Stargate" project, announced in January, is a joint initiative by OpenAI, Oracle, and SoftBank Group, with an initial investment of 100 billion dollars. The project aims to invest 500 billion dollars over the next four years to build AI infrastructure in the United States. This collaboration marks a significant step for OpenAI in reducing its dependence on Microsoft for data center capacity. The project is expected to support a substantial portion of OpenAI's AI model development and operation needs by 2030.

Oracle's stock price responded positively to the news, rising by more than 5% to close at 229.98 dollars, marking a new historical high. This increase reflects the market's confidence in Oracle's strategic move to expand its data center capabilities and secure long-term revenue streams. The company had previously disclosed a cloud service agreement that is expected to contribute over 300 billion dollars in annual revenue starting from the 2028 fiscal year. The agreement with OpenAI is believed to be a part of this larger cloud service deal.

The collaboration between Oracle and OpenAI underscores the growing demand for advanced AI infrastructure. The 4.5 GW of power capacity that Oracle will provide to OpenAI is unprecedented and highlights the significant energy requirements for large-scale AI operations. This deal not only strengthens Oracle's position in the cloud services market but also positions it as a key player in the AI infrastructure landscape. The expansion of data centers across multiple states will further enhance Oracle's ability to support high-demand AI applications and services.

As a manufacturer of database software, Oracle has made significant strides in renting out computing power and storage services over the internet, with a focus on enterprises engaged in AI work. This has led to substantial growth in both its revenue and expenses. The 300 billion dollar transaction exceeds the current scale of Oracle's entire cloud infrastructure business. The company's aggressive expansion into cloud infrastructure is consuming its cash flow, with current spending levels exceeding expectations. However, the long-term prospects of Oracle's cloud strategy remain promising.

OpenAI has previously announced its collaboration with Oracle, Crusoe, NVIDIA, Cisco, and G42, an AI company supported by the Abu Dhabi sovereign wealth fund, to develop the "Stargate" project in the United Arab Emirates. This initiative further solidifies Oracle's role as a critical partner in the global AI infrastructure landscape, highlighting its commitment to supporting the development and operation of advanced AI models.