Larry Ellison broke from Elon Musk at the exact moment OpenAI needed a miracle, and that choice pushed Oracle into the most expensive cloud gamble ever written on paper.
The whole thing began when OpenAI sent a random LinkedIn message in spring 2024 to Oracle sales leaders. It was from Peter Hoeschele, who said OpenAI needed more computing power.
OpenAI had been rushing to rent data center space, buy GPUs, and design its own chips since ChatGPT went viral in 2022. Nothing was enough. The company was burning billions while trying to keep up with demand.
Oracle already had plans for a massive West Texas data center. That plan originally involved Elon’s xAI.The buildings were supposed to be X-shaped, according to people close to the deal.
Elon and Larry were tight for years. Larry served on Tesla’s board and hosted Elon on Lanai. But Elon decided to build his own sites and walked away.
Right after he did, the LinkedIn message landed in Oracle’s inbox and flipped the whole direction of the project.
White House event reveals Stargate plan
Peter’s message pushed Oracle and OpenAI into talks. Months later, Oracle, OpenAI, and SoftBank joined Donald Trump at the White House on Trump’s second day back in office. Trump announced a national AI data center plan called Stargate and said it would create huge numbers of jobs.
Trump told the room, “So put that name down in your books, because I think you’re going to hear a lot about it in the future.”
Trump then called Larry to the lectern. Larry said, “Thank you, Mr. President, we certainly couldn’t do this without you,” and added, “AI holds incredible promise for all of us, for every American.” He kept it short. He said the new data centers were already under construction and each building was “a half a million square feet.”
Behind the big show, Stargate is simply a huge cloud deal.OpenAI agreed to pay Oracle about $300 billion to rent servers. The companies talked about expanding the deal even more. Oracle now must build about five giant data center complexes, each among the world’s biggest, filled with millions of chips and requiring 4.5 gigawatts of power.
Oracle is also helping OpenAI build capacity in the UAE. Deadlines are already slipping. The first 2027 completion targets are now sliding to 2028 because of shortages.
Oracle said in a statement that all milestones are still on track. The company said there were “no delays to any sites required to meet our contractual commitments.”
Stargate costs hit Oracle’s finances
OpenAI is losing billions a year, yet the market loved the idea. Oracle’s stock added about $250 billion in value in early September when investors heard the size of the new cloud bookings. Larry, who owns 40% of Oracle, briefly became the richest person in the world.
Oracle signed other large AI infrastructure deals with Meta and Nvidia. Clay Magouyrk became co-CEO of the company in September as Oracle reorganized around AI. But the cash burn is massive. Oracle’s free cash flow went negative for the first time since 1992. Microsoft refused a similar OpenAI hosting deal. Traders began buying Oracle credit-default swaps, and the price jumped after Oracle’s December earnings showed costs rising faster than expected.
Oracle’s old reputation also hangs over everything. Larry, Bob Miner, and Ed Oates founded Oracle in 1977, and the company gained a record for aggressive tactics. Early products overstated features. The SEC forced Oracle to redo earnings in the 1990s after it booked sales too early. Oracle also paid investigators to dig through trash during the Microsoft antitrust trial. Larry called the operation a “public service.”
Oracle also sued Google for 11 years over Java. Larry has put personal interests into company business for years. Oracle bought NetSuite for $9.3 billion in 2016, and shareholders accused him of enriching himself. A judge ruled for Oracle.
Oracle missed the cloud wave for years. Larry mocked the cloud as “complete gibberish” in 2008. Only in 2012 did Oracle launch its own cloud service, and today it holds only 3% of the market. The pandemic helped Oracle win big contracts like Zoom and TikTok’s Project Texas. A ByteDance executive heard Clay say, “Oracle would not be where we are today without all of the opportunities and learnings that we’ve had from serving you and your customers.”
In 2025, Oracle replaced longtime CEO Safra Catz with Magouyrk and Mike Sicilia. Magouyrk got $150 million more in compensation. Both report to Larry.
Oracle is using outside financing to keep costs off its books. Vantage Data Centers is borrowing $38 billion for two campuses. Yet Oracle still faces about $70 billion in free cash flow losses this decade. The Stargate contract lets OpenAI walk away after five years. OpenAI has also signed deals with Amazon, AMD, Broadcom and CoreWeave, and has said it may build its own data centers.
Analyst Gil Luria said there are three outcomes: Oracle cuts its forecasts but keeps some work, OpenAI collapses, or “OpenAI achieves super-intelligence, spends $1.4T, none of us have to ever work again, and Oracle is fine.”
Larry has kept tight control. He oversees more workers now than before. He still weighs in on product details. At AI World, he spoke about farming for 10 minutes, then said AI is “the largest, fastest-growing business in human history, bigger than the railroads, bigger than the Industrial Revolution.”
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