How Oracle plays cheaply in AI

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Subscribe to enjoy similar stories. When it comes to big techs, Oracle is hardly small-fry. But the 47-year-old software titan still has to play its hand deftly when it comes to the ultra-expensive game of artificial intelligence.

Its approach was apparent in the high-profile announcement about the “Stargate Project," which aims to invest $500 billion over the next four years to build new AI infrastructure for OpenAI. Oracle was named as both an equity investor and “key initial technology partner" for the project, and founder and Chairman Larry Ellison joined OpenAI’s Sam Altman and SoftBank Chief Executive Masayoshi Son Tuesday at the White House for the announcement. Ellison noted Tuesday that construction on the initial data center for the project was already under way in Texas.

Less clear is where such a staggering sum of money will be coming from. OpenAI said $100 billion was being deployed immediately, but that is more than double Oracle and Softbank’s combined total cash on hand. Elon Musk, backer of his own AI project, used his X social-media platform to cast doubts about the financial backing for Stargate.

Oracle has already ratcheted up its capital expenditures on AI significantly, with annual total capex now nearing $11 billion annually compared with an average of $5.5 billion over the last four fiscal years. Oracle’s share price has jumped 14% over the last two days since Stargate was first reported, so Wall Street doesn’t seem terribly worried about who is footing the bill at this point. Analysts instead noted that Oracle’s prominent Stargate role solidifies the position of its cloud unit known as OCI as an important force in powering generative AI workloads.