In a groundbreaking move, a prominent AI company has entered into a staggering $30 billion annual agreement with a leading cloud service provider for data center services. This significant deal, which was revealed last month, has been confirmed by the CEO of the AI firm, who shared insights about the contract on social media and through an official blog post.
To provide some context, the cloud service provider announced in a recent filing that it had secured a deal projected to generate $30 billion in yearly revenue. However, the specifics regarding the partner involved and the nature of the services were initially kept under wraps. This announcement led to a surge in the provider’s stock price, propelling its founder to become one of the wealthiest individuals globally.
As speculation mounted regarding the identity of the client, many industry experts pondered which organization could require such an immense investment in data center services. For perspective, the cloud service provider reported total sales of $24.5 billion in cloud services across all its clients in the previous fiscal year.
The AI company has clarified that this substantial agreement pertains to 4.5 gigawatts of capacity, which is part of a massive $500 billion initiative aimed at constructing data centers. This ambitious project is a collaboration between the AI firm, the cloud service provider, and another major player in the tech industry. Notably, the $30 billion agreement does not involve the latter partner.
According to reports, the 4.5 gigawatts of power is comparable to the output of two Hoover Dams, sufficient to supply energy to approximately four million households.
However, this venture is not without its challenges. Both companies must undertake the construction of this extensive data center, which will require significant financial and energy resources. The project is set to take place at a designated site in Texas.
In the previous fiscal year, the cloud service provider invested over $21 billion in capital expenditures, with expectations to allocate an additional $25 billion this year. This means that nearly $50 billion will be directed towards data centers over two years, which also supports the needs of existing clients alongside the new demands from the AI company.
In a related development, the CEO of the AI firm recently announced that the company has achieved an impressive $10 billion in annual recurring revenue, a notable increase from $5.5 billion the previous year. This new commitment to the cloud service provider represents a significant portion of the company’s revenue and does not account for other operational expenses, including existing data center commitments.