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The launch of Stargate, an apparent $500bn project to build data centres in the US, was hailed by President Donald Trump in January as “the largest AI infrastructure project by far in history”.
An “immediate” $100bn investment was promised by Stargate partners OpenAI, Japanese investor SoftBank, Oracle and Abu Dhabi fund MGX, which declared the project would “support the re-industrialisation of the United States”. But after four months, its financing and future are far from straightforward.
The $500bn headline cited by Trump came from OpenAI’s calculations of the cost of the computing power it believes it needs, not because anyone has invested that sum of capital in the project. Stargate will only build data centres for use by OpenAI; it has about $50bn in investment commitments; and the only OpenAI data centre being built in the US is owned and operated by separate companies.
Given how keen investors are on AI, the project will probably not struggle to raise a lot of cash. And Stargate’s funding plan is a canny move by OpenAI given it will not dilute its stock. But, when its financing is examined, it is difficult to see how Stargate will follow through on its pledge to “begin deploying $100bn immediately”. So far the only money that has been put to work directly is in Abu Dhabi, where there are plans to build “Stargate UAE”. The bulk of that funding — reportedly as much as $20bn — will come from G42, an Emirati wealth fund.
SoftBank and OpenAI have each committed about $18bn to the Stargate venture. OpenAI’s contribution will come largely from capital it has raised from SoftBank, the latter having agreed to lead a $40bn funding round this year for an as yet undetermined equity stake in the start-up. Oracle and MGX, an Abu Dhabi sovereign wealth fund, have each agreed to put in $7bn, and there is some further “seed funding” that has already gone in, according to a person close to Stargate.
SoftBank is in the process of raising cash from equity and debt investors to meet its commitments, in effect syndicating out part of its investments in OpenAI and in Stargate, according to several people close to the matter.
Of the approximate $58bn total that SoftBank has agreed in funding for OpenAI and Stargate, just $7.5bn has changed hands so far, arriving in the AI company’s bank account this month. The timing of the rest of its investment in OpenAI and the size of its eventual stake will depend on complicated restructuring with its biggest backer, Microsoft.
Altman said in February that OpenAI had sent out requests for proposals (RFPs) to 16 US states and aimed to build between five and 10 data centre campuses, each designed to support 1 gigawatt of power or more. Each site will have a “different financing structure”, according to a person close to the project, who described Stargate like a venture capital fund “where you have some seed capital then get other partners”.
It is likely a big portion of that will come from debt. Lenders have been doing frenzied deals with data centre builders and operators. CoreWeave, a data centre start-up that publicly listed in March, has fuelled its rapid growth with $13bn in debt, while CyrusOne, which is owned by KKR and Global Infrastructure Partners, has secured nearly $12bn in debt financing, including $8bn for US data centre projects.
The financial impact of these kinds of data centre build outs are huge. Law firm Baker Botts estimates the data centre industry is expected to triple in size globally by 2034, from $256bn in asset value to about $776bn.
But, for now, the only apparent OpenAI related project in the US is a colossal 1.2GW data centre being built in Abilene, Texas, which predates Stargate by about a year. Neither Stargate, SoftBank or OpenAI have a financial stake in it. The Abilene site, which will cost $15bn to build by the time it is due to be completed by mid-2026, is being built by data centre start-up Crusoe and Blue Owl Capital, a private capital fund. Oracle has agreed to lease it for 15 years, and has contracted out its power to OpenAI.
In Silicon Valley, some investors ask whether the AI infrastructure boom will become what fibre optic cables were to the dotcom era. Then heavy investment in cable networks resulted in overcapacity and failures when the bubble popped. It hard to know yet whether we are now in similar hype cycle, but it is looking more clear that the technology will have to be as transformative as the internet to justify the mooted data centre investment.
