OpenAI announced plans to invest $300 billion in cloud computing starting in 2027, which will significantly affect the market and players like Oracle.
Oracle and OpenAI Deal
Oracle has secured a contract with OpenAI for 4.5 gigawatts of U.S. data center capacity, equivalent to that of a small country. This multi-billion dollar contract is part of a broader $30 billion arrangement set to take effect in two years. Following the announcement, Oracle's stocks initially surged but dropped 6% on Thursday and an additional 5% on Friday.
Wins for Other Tech Giants
Oracle is not the only company benefiting from cooperation with OpenAI. Broadcom shares surged after news of a $10 billion deal linked to OpenAI. Microsoft continues to host most of OpenAI's workloads on its Azure cloud, while Nvidia has become the world's most valuable firm by providing chips for OpenAI's language models. Collectively, these companies have added over $4.5 trillion in market capitalization since the launch of ChatGPT.
OpenAI's Growth Plans and Risks
Despite its rapid growth, OpenAI continues to burn through cash. Its nonprofit structure limits fundraising capabilities, even as it expands rapidly. CEO Sam Altman is securing large contracts, but analysts caution that dependency on a single client could be precarious. OpenAI plans to restructure to unlock a $40 billion funding round, though doubts remain about the sustainability of this strategy.
OpenAI demonstrates impressive growth and ambitious plans while facing risks associated with high reliance on key clients. This scenario could impact not only OpenAI but also partners like Oracle in the future.
