OpenAI announced Tuesday that it will develop 4.5 gigawatts of data center capacity in partnership with Oracle — confirming an expanded partnership between the two companies within the buzzy Stargate infrastructure initiative. Oracle stock was slightly lower Tuesday.
The new data center comes as Oracle and OpenAI are already opening the so-called Stargate I site in Abilene, Texas. The locations of the new sites have not been disclosed. With the new agreement, OpenAI said it is developing data centers worth 5 gigawatts of capacity with Oracle. The data center will run more than 2 million chips for computing power dedicated to AI, according to the announcement.
On the stock market today, Oracle stock was down more than 2% at 239.56 in morning trades.
Tracking Stargate
Plans for the expanded partnership between Oracle and OpenAI were reported by Bloomberg earlier this month, sending Oracle stock higher at the time.
The report came after Oracle Chief Executive Safra Catz said in a June 30 regulatory filing that Oracle had landed a cloud services deal that could contribute $30 billion in annual revenue starting with the company's fiscal 2028.
Oracle has rallied about 12% since the June 30 disclosure. Analysts see the OpenAI deal as a major win for Oracle's effort to establish its cloud infrastructure business as a serious competitor to Amazon and Microsoft. Oracle reported $10.3 billion in cloud infrastructure sales for its May-ended fiscal 2025.
But Oracle stock fell late Monday after the Wall Street Journal reported that the Stargate project has "struggled to get off the ground" and could scale back its near-term plans.
The Stargate project was announced in January at the White House. It calls for investments of up to $500 billion over the next five years to build data centers to power AI systems. SoftBank, OpenAI and Oracle are the initial partners.
But OpenAI and SoftBank have disagreed about key parts of the project, according to the report.
In the announcement Tuesday morning, OpenAI said its "partnership with SoftBank is moving forward with strong momentum."
But SoftBank is not listed as involved in the latest plans with Oracle. OpenAI on Tuesday cast a wide net for what it considers part of Stargate.
"Stargate is OpenAI's overarching AI infrastructure platform – encompassing ongoing data center partnerships with Oracle, SoftBank and CoreWeave and international investments in U.S. infrastructure through OpenAI for Countries," the company's news release said. "Microsoft will continue to provide cloud services for OpenAI, including through Stargate."
Oracle Stock: Up 46% This Year
However, Oracle stock analysts saw Tuesday's news as a positive for Oracle.
How Oracle will finance this significant data center buildout is the key question, Evercore ISI analyst Kirk Materne told client Tuesday.
He expects Oracle will need to spend an additional $40 billion in capital expenditures through 2028 to support the $30 billion in new annual AI revenue for its Oracle Cloud Infrastructure business. That will likely require Oracle raise debt, he added.
"While there are a lot of moving parts related to Oracle's capex spend, we believe the growth potential associated with OCI remains the primary driver for the shares in the near-term" Materne wrote. He rates Oracle stock as outperform, or buy.
Despite a 3% pullback so far this week, Oracle stock has rallied 46% this year. Last year, Oracle surged 60% to post the company's best share price-growth performance since 1999.
