A secret war between Oracle and Microsoft will shape the future of AI
14 September, 2025
The race for multi-billion dollar contracts from OpenAI is on, while the new alliance between Oracle and OpenAI threatens Microsoft's past investments in the company leading the AI revolution
Photo above: Construction works at Stargate facility, Texas, USA. Credit: OpenAI
The developing competition between Oracle and Microsoft for OpenAI’s huge investments budgets is not accidental and was, in many ways, even expected. However, the scale and outcome of this conflict could reshape the entire ecosystem of Artificial Intelligence in the coming years. Last week, The Wall Street Journal reported that OpenAI had signed an unprecedented $300 billion cloud infrastructure agreement with Oracle, starting in 2027. Following this news, Oracle’s stock on the NYSE surged by about 40% in a single day. While it has since fallen slightly (to $291), the company is now trading at a record high market capitalization of $830 billion.
This agreement comes less than two months after the signing of a collaboration deal to build and operate a 4.5 gigawatts data center in Texas, USA, that will house over 2 million processors. “Oracle began delivering the first Nvidia GB200 racks last month and we recently began running early training and inference workloads, using this capacity to push the limits of OpenAI’s next-generation frontier research.” The project will be executed through a new subsidiary, Stargate Project, with a total investment of about $500 billion over the next four years. The main investors in Stargate Project, alongside OpenAI, are SoftBank, Oracle, and the Emirati investment fund MGX.
Don’t Upset Microsoft
“As part of Stargate, Oracle, NVIDIA, and OpenAI will closely collaborate to build and operate this computing system. This builds on a deep collaboration between OpenAI and NVIDIA going back to 2016 and a newer partnership between OpenAI and Oracle,” OpenAI stated. To appease its largest investor, the company added a note: “OpenAI will continue to increase its consumption of Azure as OpenAI continues its work with Microsoft with this additional compute to train leading models and deliver great products and services.”
Why is this comment so crucial? Because Microsoft and OpenAI have a unique relationship. Since OpenAI’s inception in 2019, Microsoft has been its primary investor. Many analysts in the industry estimate it has invested in OpenAI more than $13 billion to date. Microsoft has also provided significant technological resources to OpenAI, including access to vast computing resources on its Azure cloud for training and hosting models like GPT-3.5 and GPT-4.
In return, it gained the ability to integrate OpenAI’s technology into its products. The Azure OpenAI service allows customers to use OpenAI models through Microsoft’s platform, and Microsoft’s Copilot platform is based on integrating OpenAI technology into Office applications, the Bing search engine, and the Windows operating system. It remains unclear how the two partners will resolve the conflict created by the new alliance with Oracle.
Perhaps to calm investors and customers, they released on September 11, 2025 a joint, brief, and cryptic statement: “OpenAI and Microsoft have signed a non-binding memorandum of understanding (MOU) for the next phase of our partnership. We are actively working to finalize contractual terms in a definitive agreement. Together, we remain focused on delivering the best AI tools for everyone, grounded in our shared commitment to safety.” Is this a peace treaty or a declaration of war? It’s unclear.
The Software Giants Meet in the Cloud
In any case, the financial reports from both Microsoft and Oracle reveal that even if not explicitly stated, the two companies have long been on a collision course. Oracle’s latest quarterly report shows that nearly half of its revenue now comes from its cloud services. In the first quarter of fiscal year 2026, which ended in August 2025, Oracle’s sales totaled $14.9 billion. The main component (48% of sales) was revenue from cloud solutions and services, which grew by 28% compared to the same quarter last year, reaching $7.2 billion. The software sales component dropped to just 38%, compared to 44% last year, totaling $5.7 billion.
The cloud is also becoming the main component of Microsoft’s revenue. In the fourth fiscal quarter ending in June 2025, its sales totaled $76.4 billion. Sales from cloud services grew by 26% compared to the same quarter last year, reaching $29.9 billion, nearly 40% of total sales.
In other words, both software giants are gradually transforming into cloud-based companies. And since artificial intelligence is the largest growth engine for cloud services, they are clashing at a specific moment: when the leading company in AI services is finalizing its strategic plan for the coming years.
Posted in: AI , News , Software and IT
