Oracle(US:ORCL) Haitong Securities International·2025-07-03 12:16Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies involved. Core Insights - OpenAI has signed a significant compute infrastructure agreement with Oracle, leasing up to 4.5 GW of data center capacity, with an annual contract value potentially exceeding $30 billion, effective from FY2028. This partnership is crucial for OpenAI's model training and inference needs and indicates Oracle's growing share in the AI infrastructure market [1][7]. - OpenAI is transitioning towards a multi-cloud strategy, reducing its dependency on Azure and partnering with Oracle, Google, and others. This shift reflects OpenAI's increasing need for diversified compute supply due to the exponential growth in training cycles and parameter scales since the GPT-4 architecture [2][8]. - The agreement marks a pivotal moment for Oracle, enhancing its position in the AI infrastructure sector. Historically a leader in databases, Oracle has lagged in public cloud IaaS competition but is now poised to achieve scale advantages similar to AWS, Azure, and Google Cloud through this partnership [3][9]. Summary by Sections OpenAI's Strategy - OpenAI is no longer reliant solely on Azure for its infrastructure needs, adopting a multi-cloud approach and forming partnerships with Oracle, Google, and CoreWeave [5][11]. - The collaboration with Oracle allows for large-scale deployment capabilities that support OpenAI's commercial-scale inference workloads [5][11]. - OpenAI is expected to take a more active role in infrastructure-level strategic planning, evolving into a dual-role entity that combines model development with platform operations [5][11]. Oracle's Positioning - The deal with OpenAI is a critical turning point in Oracle's decade-long cloud transformation strategy, enabling it to catch up in the IaaS market [3][9]. - The agreement is projected to significantly enhance Oracle's IaaS revenue structure and profitability profile, with an estimated annual revenue of up to $30 billion starting in FY2028 [5][11]. - Oracle is accelerating capital expenditures for hyperscale data center projects, with a projected compound annual growth rate (CAGR) of over 30% from 2H24 to 2027E [5][11]. - As a key customer of NVIDIA, Oracle is well-positioned to secure GPU resources, which will be monetized through high-margin infrastructure leasing [5][11]. - Oracle's focus on AI-first infrastructure and dedicated tenancy aligns well with OpenAI's heterogeneous deployment needs, marking a strategic win against competitors like AWS and Azure [5][11].