'Stargate' Squares Some AI Circles

If John 'Hannibal' Smith loves it when a plan comes together, I love it when a plan comes together hastily. Because it's so much more interesting to write about. And that seems to be the case with 'The Stargate Project',¹ the new "company" which aims to invest $500B over the next four years into building out AI infrastructure, maybe. For America, maybe.

Look, the project, spearheaded by OpenAI is clearly meant to be ambitious. And that's great. It is perhaps a unique moment in time in the US right now for ambitious projects to get done. Or at least started. And Sam Altman and crew wasted no time jumping on the opportunity to give just-sworn-in President Trump an early PR win.

$500B! AI! In America!

Looking just below the surface yields a lot of questions though. Hell, even the release itself does. It reads almost like an Einstein's Riddle brain game. Let's parse it, shall we?

The Stargate Project is a new company which intends to invest $500 billion over the next four years building new AI infrastructure for OpenAI in the United States. We will begin deploying $100 billion immediately. This infrastructure will secure American leadership in AI, create hundreds of thousands of American jobs, and generate massive economic benefit for the entire world. This project will not only support the re-industrialization of the United States but also provide a strategic capability to protect the national security of America and its allies.

Why four years? That's the length of Trump's term, of course.² Why $500B? Unclear, but it's a nice, round number that sounds big. Trump likes big. Why $100B to start? This seems like an amount the group may actually have line-of-sight to get access to (more on this in a bit). Also, that's five references to the US or America in four sentences. Make America redundant again.

The initial equity funders in Stargate are SoftBank, OpenAI, Oracle, and MGX. SoftBank and OpenAI are the lead partners for Stargate, with SoftBank having financial responsibility and OpenAI having operational responsibility. Masayoshi Son will be the chairman.

Back to that $100B, at least some of that money will come from SoftBank, OpenAI, Oracle, and MGX in exchange for equity in the "company". How that money breaks down is anyone's guess, but if I had to – as I did last night – I would imagine that SoftBank and MGX are the two largest and real capital commits here.

But neither seemingly has enough capital on hand to equal a $100B commit, let alone $500B. SoftBank has about $30B in cash. MGX started last year as a $100B fund, but they've already made several commitments, notably to OpenAI itself. But they also apparently can mobilize more capital as needed, which seems key here. Especially since Oracle "only" has about $11B in cash and OpenAI is a cash-burning machine at the moment. They have some money in the bank thanks to their recent fundraise, but they definitely shouldn't be using too much of it for this infrastructure build out. As noted, they're mainly the "operational" partner while SoftBank is the key "financial" partner, with Masa Son as chairman.

So we can probably assume that there will be other funding sources that perhaps flow through SoftBank (and/or MGX) to get to the $100B. Notably, this will undoubtedly include debt, which is a favorite vehicle of Son's – SoftBank currently has around $150B in debt on their books. But given that Altman had been talking to various capital and infrastructure partners in the Middle East, we can probably also assume that at least some of that capital will now flow into this US-based project.

Arm, Microsoft, NVIDIA, Oracle, and OpenAI are the key initial technology partners. The buildout is currently underway, starting in Texas, and we are evaluating potential sites across the country for more campuses as we finalize definitive agreements.

The first three companies are like the executive producers of the project. They're lending their name to the project to both be acknowledged and give it credibility. Yes, their key underlying tech will be used – but they'll also undoubtedly be paid for that usage. The Texas element seems directly related to the datacenter in Abilene, Texas which Oracle has been building (and OpenAI had previously been talking about leasing). With this news, there's a pattern that's starting to come into view here: previously announced deals and projects are getting roped into this "new" initiative.

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.

This is where the aforementioned Einstein's Riddle starts to get fun. It's a mind-twister of a statement to figure out who is doing what here, with everyone seemingly needing credit for exactly what they're doing and not doing. While ARM and Microsoft may be "key" technology partners per above, they're apparently not going to "closely collaborate" to build this datacenter, as it's more an Oracle + NVIDIA thing. And the Oracle element in particular is interesting here. Because this is OpenAI acknowledging that they have a new cloud partner beyond their exclusive agreement with Microsoft. (More on this in a bit.)

This also builds on the existing OpenAI partnership with Microsoft. 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.

Yes, it "builds on" that partnership in that it's building on the back of it. This entire paragraph exists just to let the world know that Microsoft and OpenAI aren't breaking up. Without it, the paragraph that proceeded it would lead to a lot of speculation about the relationship. This is to say, "not to worry everyone, we're still together, we've just decided to see other people." (More on this in a bit as well.)

All of us look forward to continuing to build and develop AI—and in particular AGI—for the benefit of all of humanity. We believe that this new step is critical on the path, and will enable creative people to figure out how to use AI to elevate humanity.

A pretty vanilla, standard concluding paragraph. The most surprising element is that America isn't mentioned once, let alone five times! OpenAI clearly wanted to squeeze an 'AGI' reference in there though. Oh yeah, and 'people'. Don't worry, AGI isn't coming for your jobs! Well, 'creative people' anyway.

This announcement was timed with a statement from Microsoft. Their note is much more straightforward, and clearly has been in the works for a while. They sort of bury the lede – again, they're going to start seeing other people, well, at least OpenAI is in the form of other cloud providers, which Microsoft can approve of or disapprove of, like a doting parent (or really, an overbearing one) – wait, these are really not metaphors I should be mixing... Anyway, it's framed in such a way to make it clear that Microsoft would like you to know (or think) that this was their idea. Or, at the very least, that they're happy about it. Or even "thrilled" as they say in their opening.

And they undoubtedly are happy with the agreement. The two sides have clearly been drifting apart as their idyllic marriage has come under immense strain living under the pressure of perhaps the fastest-growing technology ever. This deal relieves some of that pressure. OpenAI gets to "sleep around" with other datacenter and cloud providers – scaling on Microsoft's stack, which has their own needs, including for their own AI, has been perhaps the biggest tension for them. Microsoft gets to offload some of that scaling and, crucially, CapEx, to others – while still maintaining their IP rights and business model needs (via OpenAI's APIs and models).

And it puts a timetable on the deal: 2030. It would be interesting to know which side wanted that – perhaps both, but probably OpenAI more so. And my guess would be that it formally does away with that whole breakup-when-AGI-is-achieved funny business. That, in turn, relieves the pressure for OpenAI to declare "AGI" – and that might mean that they announce it sooner than they otherwise would, by the way. Now they can do it without worrying that it changes their key structural relationship with Microsoft.

Anyway, all of that makes sense. But back to the notion that Stargate is sort of a catch-all of convenience for many of the parties involved, let me spell it out a bit more clearly:

1. Donald Trump gets a quick, early political win around tech and AI with a big, marquee number and big, marquee names – it also keeps OpenAI fully operating in the US without needing to build out their AI infrastructure with partners overseas (at least for now)
2. OpenAI gets the same win for their own AI infrastructure agenda which Sam Altman has been pushing for and they get to break away from their Microsoft exclusive datacenter deal while also getting more structure around their Microsoft deal
3. Oracle gets OpenAI's business and Larry Ellison gets to be on stage with the newly-elected President announcing this – they also get to take the win for a datacenter they were already building
4. SoftBank gets a second round of PR around an initiative that was already announced with Trump! This undoubtedly will be the same capital that was going towards the nebulous $100B commitment to the US that Masa Son made in December – it also gives them a way to keep plowing money into OpenAI after feeling they missed the boat early
5. MGX gets a way to double, triple, and quadruple down on AI and specifically, OpenAI – great timing on top of the great name
6. Microsoft gets to maintain their OpenAI partnership without seeing the CapEx required drag them into Wall Street purgatory and they get business and technology protections – if you've heard the name 'Stargate' before, it's because it was supposed to be a project that Microsoft was building out for OpenAI; they may have just saved themselves $100B – or even $500B!
7. ARM gets to be announced as a key partner here – thanks SoftBank!
8. NVIDIA gets to make a shit ton more money – thanks everyone!

One more thing: the tweet version of the Stargate announcement had a funny reply guy: "They don’t actually have the money" tweeted, um, Elon Musk. It was sort of wild that he wasn't involved in this announcement/press conference given that he's, well, everywhere President Trump seems to be right now. You have to assume he knew about the deal – even if he wasn't directly involved in the discussions, one of the partners surely would have leaked the details to him. So is this just trolling or is he actually pissed off about this deal? Unclear right now, but I'm sure we'll find out soon enough!

Or maybe he is just being literal here – they really may not have the money right now, per all of the above.³ It's more a PR announcement that was clearly thrown together quickly and also ties up a bunch of loose ends. You have to assume they'll get the $100B, but when and where and how they deploy the other $400B, my guess is that right now, nobody knows.

Update: Altman has now responded to Musk's tweets on the matter noting they were "wrong, as you surely know". That is specifically respondinn to a Musk claim that SoftBank has "well under $10B secured" -- and Altman goes on to invite Musk to see the new facility that is already underway. But again, it's a facility that was underway before this announcement...

The fact that Trump apparently spoke with Altman and got this announcement out there without it being blocked by Musk is certainly something to watch given this back-and-forth... Political games in politics, who would have imagined?

Meanwhile, Satya Nadella basically gave a "keep me out of this" with "all I know is, I’m good for my $80 billion," which just speaks to Microsoft's overall CapEx spend on the year and per the above, they're notably not slated to be a capital partner in the Stargate project (after initially incubating it with OpenAI).

¹ Find yourself someone who loves you as much as tech companies love to use the 'Stargate' codename. To be fair, it was a pretty awesome mid-90s sci-fi movie (and later show). What a teleportion gate has to do with AI, nobody knows.

² And he can't run for another term having already served one from 2016 - 2020 – though, it seems safe to assume that at some point he'll try to see if there's a workaround to that pesky 22nd Amendment to the Constitution.

³ Funding not secured, one might say...