This week, OpenAI and Oracle shocked the markets with a surprise $300 billion, five-year agreement, part of a surge of new business that sent the cloud provider’s stock skyrocketing. But maybe the markets shouldn’t have been taken by surprise. The deal is a reminder that, despite Oracle’s legacy status, the company still plays a major role in AI infrastructure.
On the OpenAI side, the agreement was more revealing than the lack of details suggest. For one, the startup’s willingness to pay so much for compute provides a measurement of the startup’s appetite — even if it’s unclear where the electricity to power said compute is coming from or how it will pay for it.
Chirag Dekate, a vice president at research firm Gartner, told TechCrunch it’s clear why both sides were interested in this deal. It makes sense for OpenAI to work with several infrastructure providers, he noted. It also diversifies the company’s infrastructure — spreading out risk among several cloud providers — and gives OpenAI a scaling advantage compared to competitors.
“OpenAI seems to be putting together one of the most comprehensive global AI supercomputing foundations for extreme scale, inference scaling where appropriate,” Dekate said. “This is quite unique. This is probably exemplary of what a model ecosystem should look like.”
Some industry watchers expressed surprise that Oracle was involved, citing the company’s diminished role in the AI boom compared to cloud rivals like Google, Microsoft Azure, and AWS. But Dekate argues that observers shouldn’t be so surprised: Oracle has worked with hyperscalers before, and provides the infrastructure for TikTok’s sizable U.S. business.
“Over the decades, they actually built core infrastructure capabilities that enabled them to deliver extreme scale and performance as a core part of their cloud infrastructure,” Dekate said.
Payment and power
But even as the stock market celebrates the deal, key details are missing and questions around power and payment remain.
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OpenAI has made a string of infrastructure investment announcements over the past year, each one with an eye-popping price tag. OpenAI has committed to spend around $60 billion a year for compute from Oracle and $10 billion to develop custom AI chips with Broadcom.
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