Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
The launch of Stargate, an obvious $500 million project to build data centers in the United States, was hailed in January by President Donald Trump as “the largest AI infrastructure project in history, across the flock.”
The “immediate” $100 million investment has been promised by Stargate Partner Open, Japanese investors SoftBank, Oracle and Abu Dhabi Fund MGX, which declared the project “supports the reindustrialization of the United States.” But four months later, its funding and future will not be easy.
The $500 million headline cited by Trump came from Openai’s calculations on the cost of computing power that appears to be necessary, not because he invested its capital in the project. Stargate only builds data centers for Openai to use. The investment commitment is around $500 billion. And the only Openai data center built in the US is owned and operated by separate companies.
Given how enthusiastic AI investors are, the project will probably not have a hard time raising a lot of cash. And Stargate’s funding plan is Canny’s move by Openai, given Openai will not dilute its inventory. However, once the funding is investigated, it is difficult to know how Stargate will track its pledge to “start the $100 billion rollout soon.” So far, the only money that has directly worked is Abu Dhabi, with plans to build “Stargate United Arab Emirates.” The majority of that funding (although reportedly as $200 billion) comes from the Emirati Wealth Fund G42.
SoftBank and Openai each committed around $18 billion to Stargate Venture. Openai’s contributions stemmed primarily from capital raised from SoftBank, the latter agreed to lead a $400 billion funding round this year for undecided stock investments at a still-undecided startup. Abu Dhabi sovereign wealth funds Oracle and MGX have each agreed to put in $7 billion, with more “seed funds,” according to people close to Stargate.
SoftBank is in the process of raising cash from stocks and debt investors to meet its commitments, effectively syndicates some of its investments in Openai and Stargate.
Of the total $58 billion SoftBank agreed to fund Openai and Stargate, it has changed $7.5 billion to date that arrived at AI company bank accounts this month. The timing of the remaining investment in Openai and the ultimate stakes depends on a complex reorganization with Microsoft, its biggest backer.
Altman said in February that Openai had sent proposals (RFP) requests to 16 US, with the aim of building 5-10 data center campuses designed to support more than 1 gigawatts of power each. According to people close to the project, each site has a “different funding structure” and Stargate described it as “where seed capital is where they are gaining other partners.”
The majority of this will come from debt. Lenders have enthusiastic deals with data center builders and operators. CoreWeave, a data center startup that was released in March, fueled rapid growth with $13 billion in debt, while Cyrusone, owned by KKR and its global infrastructure partners, secured nearly $12 billion in debt financing, including $8 billion for US data center projects.
The economic impact of these types of data center build-out is enormous. Law firm Baker Botts is expected to triple the data center industry from its assets value globally to approximately $776 billion by 2034.
For now, however, an obvious Openai-related project in the US is a massive 1.2GW data center built in Abilene, Texas, with Stargate being built about a year ago. Neither Stargate, Softbank or Openai has a financial interest in it. The Abilene site will cost $15 billion by the time it is scheduled to be completed by mid-2026 and is being built by data center startups Crusoe and Blue Owl Capital. Oracle has agreed to lease it for 15 years and has signed its power with Openai.
In Silicon Valley, some investors ask if the AI infrastructure boom will become fiber optic cables in the Dotcom era. Subsequently, heavy investments in cable networks resulted in overpower and obstacles when the bubble burst into popping. It is still difficult to see if we are in a similar hype cycle right now, but it appears more clearly that technology must be as transformative as the internet to justify food stall data center investments.
tabby.kinder@ft.com
