Larry Ellison's $100B Deal With OpenAI: Biggest Tech Contract Ever?

In today's Cloud Wars Minute, I take a closer look at what may be
the biggest B2B deal in tech history, Larry Ellison’s $100B+
agreement with OpenAI.
 


Highlights


00:15 — We've seen some extraordinary things
happen with OpenAI and the alliances it has had. For the first
several years of its existence, it was tightly paired with
Microsoft. That has changed dramatically now, and OpenAI is now
tightly entwined with Oracle.


02:01 — What Oracle said in a document it filed
was that it has a cloud services contract that will pay it more
than $30 billion annually, starting in fiscal 2028. I doubt that
Sam Altman at OpenAI wants to go out every year and shop around
for new cloud infrastructure providers. So, I think it's
reasonable to expect this is going to last two years, three
years, perhaps more.


02:39 — So now, OpenAI, aligned with Oracle,
could have picked anybody. What happened to the Microsoft and
OpenAI bromance? Going back to 2019, Microsoft invested $1
billion into OpenAI. In 2021, it followed up with more, and in
2023, at the beginning of the year, the companies each put out
announcements saying: We have entered into a deeper,
longer-term, incredibly strategic, two-way technology
transfer.


03:38 — And suddenly we see this change. In just
two short years after this big announcement by both of them, we
see, in the White House, the first day of President Trump's
second term, who shows up but Larry Ellison, Masayoshi Son, the
CEO of SoftBank, and Sam Altman, the CEO of OpenAI, to announce a
$500 billion initiative called Project Stargate.


04:22 — You could have looked at this and said:
Microsoft is the biggest tech company in the world. It's the
biggest cloud company. It has the most money. It has all these
advantages. They'll never let OpenAI slip away. But they did,
or was it not so much that Microsoft let it slip away as Larry
Ellison said, Hey, I have a better approach. I have a better
way here.


05:02 — But these shifts we're seeing — where
new types of business are done in different ways, with different
combinations and partnerships — are challenging the status quo.
All these companies have to continue to do new and better things
in new and better ways that drive more value and better business
outcomes for customers.


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