Oracle is building a massive data center for OpenAI in Abilene, Texas, a project spanning the equivalent of 17 football fields. However, concerns are mounting as construction is reportedly lagging, leaving the site largely "empty." Insiders suggest that if completion is significantly delayed, OpenAI may terminate its agreement with Oracle, potentially costing Oracle billions of dollars.
OpenAI CEO Sam Altman and Oracle Chairman Larry Ellison both had high hopes for this collaboration. However, the slow construction progress is putting pressure on both parties. Mahesh Thiyagarajan, the executive overseeing Oracle's data center operations, recently expressed dissatisfaction with the construction contractors, demanding accelerated progress, even if it means adding workers and exceeding budget.
The project faces significant challenges, particularly in the construction of the energy delivery system. Oracle is clearly venturing into unfamiliar territory and must balance client demands with its own capabilities. The surging demand for large-scale facilities from companies like OpenAI is putting unprecedented pressure, especially on cash flow, on Oracle and other cloud providers.
Once known for its database software, Oracle has almost serendipitously found itself in the AI data center boom. Ellison stated during last month's earnings call that Oracle expects to sign its first major contract for the "Stargate" project soon. This project aims to build AI data centers worth up to $500 billion, with OpenAI and other companies participating.
However, sources indicate that Oracle's role in Stargate might be limited beyond the Abilene data center, with OpenAI reportedly negotiating potential collaborations with Oracle's competitors. Furthermore, the Trump administration's recent global tariff policies could significantly increase the cost of servers and materials needed for Oracle's new facilities.
Oracle's stock price surged 77% since ChatGPT's launch in 2022, but this gain has shrunk to 54% last week due to the new policies. Investors remain optimistic about Oracle's future potential in AI, but the current project delays undoubtedly add uncertainty to the company's outlook.