The announcement of Stargate Project this week surprised many for several reasons, but one stood out: the staggering $500 billion supposedly set to be invested over the next four years. This colossal figure has raised skepticism—and rightly so.
$100 billion to start. According to the announcement, companies backing the project would invest “$100 billion immediately.” Even that amount, however, seems far from attainable.
SoftBank and OpenAI take the lead. According to The Information, SoftBank and OpenAI will each contribute $19 billion to the Stargate project. Bloomberg notes that both will hold the largest stakes in the final company, with 40% each.
Musk attacks, Altman counters. The project’s unveiling quickly drew a reaction from Tesla CEO Elon Musk. On X, he stated, “They don’t actually have the money.” He later added, “SoftBank has well under $10B secured. I have that on good authority.”
OpenAI CEO Sam Altman pushed back, calling Musk’s claims “wrong, as you surely know.” Despite their rivalry, Altman surprised many by adding, “I genuinely respect your accomplishments and think you are the most inspiring entrepreneur of our time.”
SoftBank under scrutiny. Analyst MG Siegler, in his newsletter, notes that SoftBank has about $30 billion in cash, making the initial investment feasible. However, other factors cast doubt. As X user David Manheim highlighted, SoftBank’s investment fund has faced notable failures.
According to Wikipedia, the SoftBank Vision Fund lost $27.4 billion in 2022 due to poor investments led by SoftBank CEO Masayoshi Son, including a $100 million investment in the now-defunct FTX.
OpenAI’s financial strain. Doubts also surround OpenAI’s ability to contribute its share. While the company has raised significant funds in recent rounds, it continues to burn cash at a rapid pace.
Emirati money and debt options. Siegler points out that a substantial portion of the investment could come from the United Arab Emirates through the MGX investment fund. Another option might be debt, which SoftBank has often relied on. The company has invested $150 billion through leveraged funding in the past.
OpenAI exploring alternatives (Oracle). The project also hints at other strategic shifts. According to The Wall Street Journal, OpenAI is exploring options to reduce its reliance on Microsoft, a key ally. OpenAI has reportedly expressed frustration over Microsoft’s failure to provide adequate computing power and is considering alternatives like Google.
Oracle, now a participant in creating a major Texas data center alongside Nvidia, may also be in the mix. OpenAI’s ultimate goal is to reduce dependence on Microsoft—or any single entity—and Stargate could serve as a vehicle to achieve that.
Image | TechCrunch
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