OpenAI Closing Data Center Deals Without Stargate Partner SoftBank
Following a splashy unveiling at the White House earlier this year, a $500B partnership to construct artificial intelligence data centers across the country has reportedly struggled to close deals.
The Stargate venture between OpenAI, SoftBank and Oracle hasn't closed a deal for a data center project yet. The companies in January committed to an initial $100B investment in infrastructure but have since revised their plans to building just one small data center by the end of 2025, The Wall Street Journal reported.
OpenAI and Oracle appear to be moving ahead without SoftBank, despite the latter holding the trademark to the Stargate name, according to the WSJ. An issue has reportedly arisen in the partnership related to how many data centers would be built at sites related to SB Energy, an energy developer backed by SoftBank.
OpenAI has a pair of data centers planned in Texas that it refers to as part of Stargate, even though SoftBank isn't involved. One is a 1.2-gigawatt data center campus being built in Abilene, while the second is a data center in Denton that OpenAI agreed to use in March.
OpenAI also announced an agreement with Oracle this week to rent 4.5 gigawatts of additional data center capacity, calling it a "major milestone for Stargate." That deal doesn't involve SoftBank.
The deal will have OpenAI pay more than $30B yearly for the capacity starting within three years. The data centers to be rented by OpenAI are spread throughout the country.
Between that agreement and a smaller deal with CoreWeave, OpenAI has completed data center deals for almost as much capacity as was initially pledged for Stargate.
Other tech firms, like Meta, Amazon, Alphabet, Microsoft and Elon Musk's xAI, have also moved forward this year with plans to spend billions building AI data center infrastructure.
During the January announcement with President Donald Trump, SoftBank agreed to invest $30B in OpenAI along with the Stargate venture. But that pledge has forced the company to add debt to its books and sell existing assets.
The companies still portray their joint effort as progressing as expected, with OpenAI CEO Sam Altman appearing at a SoftBank event last week via video. Altman called his company’s bond with Softbank a “wonderful partnership” and said they have a goal to build 10 gigawatts of data centers.
In a joint statement, the companies noted projects were moving forward in multiple states, and they were “moving at hyperscale and speed to deliver the AI infrastructure that will power the future and serve humanity,” the WSJ reported.
Stargate's small data center project planned for this year is expected to use a lower-cost design than other projects and will likely be built in Ohio.
Known for its investment in large commercial real estate proptech players, SoftBank has pushed many of its portfolio companies into hyper-growth mode in the past, sometimes leading to negative outcomes.
SoftBank invested more than $2B into modular construction startup Katerra before it folded in 2021. SoftBank also pumped $1B into residential brokerage company Compass prior to its 2021 IPO, but then slowly disinvested its holdings in the firm. The firm also lost $14B on its investment in WeWork when the coworking company filed for bankruptcy.
