Why the Oracle-OpenAI deal caught Wall Street by surprise

This week, Openai and Oracle shocked the markets by surprise an agreement worth $ 300 billion, which is part of an increase in new business that sent the shares of the cloud provider. But it may not have been sudden market. The deal is a reminder that, although Oracle Legacy is placed, the company still plays a major role in Amnesty International’s infrastructure.

On the side of Openai, the agreement was more unveiling the lack of details indicating. For one of them, the startup’s willingness to pay a lot for an account provides an appetite for startup – even if it is not clear where the electricity comes to the mentioned energy or how you will pay it.

Chirag Dekate, Vice president of the Gartner Research Company, TECHCRUNCH was clearly why both sides were interested in this deal. It is logical that Openai works with many infrastructure providers. It also diversifies the company’s infrastructure – spreads risks among many cloud service providers – and gives Openai a scaling advantage compared to competitors.

“It seems that Openai collects one of the most supernova computing of global artificial intelligence for the sake of extreme scale, and expanding the scope of reasoning when necessary,” said Dekate. “This is unique. This may be ideal for what the typical ecosystem should look like.”

Some industrial monitors expressed their surprise at the participation of Oracle, citing the decrease in the role of artificial intelligence compared to cloud competitors such as Google, Microsoft Azure and AWS. But Dekate argues that observers should not be surprised: Oracle has worked with Easter before and provides infrastructure for large American Tiktok.

“Over the decades, they have already built the basic infrastructure capabilities that enabled them to provide the scope and maximum performance as an essential part of their cloud infrastructure,” said Dekate.

Payment and power

But even as the stock market celebrates the deal, the main details are missing and the questions about power and payment remain.

Openai has released a series of infrastructure investment ads during the past year, each at the price of the price of the eye. OpenAi adhere to spending about $ 60 billion annually to the Oracle and $ 10 billion to develop dedicated AI chips with Broadcom.

Meanwhile, Openai said in June that it reached 10 billion dollars of repeated annual revenues, an increase of about 5.5 billion dollars last year. This number includes revenues from consumer products, ChatGPT products, and API. Although the CEO of SAM Altman has drawn a pink image of its future horizons in terms of subscribers, products and revenues, the company is burning billions of dollars for cash every year.

Energy is another question, or more specifically as companies plan the energy source needed to operate this level of account.

Industry observers expect an increase in the short term of natural gas, although solar energy and batteries are in a better position to save energy in a closer time and for a lower cost in many markets. Technology companies are also betting on nuclear weapons.

Despite the headlines on the market, the power effect on the expected energy growth in Openai is completely unexpected. Data centers are expected to consume 14 % of all electricity in the United States by 2040, according to a report of the Rhodium Group yesterday.

Compute has always been a restriction for artificial intelligence companies, to the extent that investors have bought thousands of NVIDIA chips to ensure access to the companies they needed. According to what was reported, Andressen Horwitz bought more than 20,000 graphics processing units, while Nat Friedman and Daniel Gross rented access to a group of 4000 graphics processing units (although Meta may have it now).

But an account has no value without strength. To ensure that their data centers remain, major technology companies pick up solar farms, buy nuclear power plants, and to be patient with ground thermal starters.

To date, Openai was relatively calm on that front. The CEO of SAM Altman has put many prominent bets in the energy sector, including OKLO, Helion and EXOWATT, but the company itself did not offer money in space like Google, Meta or Amazon.

With a 4.5 Gigawatt account, this may change soon.

The company may play an indirect role, as it pushes Oracle to deal with physical infrastructure – which has extensive experience with – just as Altman has invested in startups that are in line with the future energy needs of Openai. This will leave the company “Asset Light”, which is undoubtedly satisfied its investors and helps to maintain its evaluation in line with other startups that focus on software and not with old technology companies, which are installed on the price of the price.