OpenAI has effectively abandoned first-party Stargate data centers in favor of more flexible deals — company now prefers to lease compute and says Stargate is an umbrella term

Sam Altman — (Image credit: Getty / Anna Moneymaker)

In early 2025, OpenAI announced Stargate, a joint venture with Oracle and SoftBank, which aimed to invest $500 billion in AI data centers in the United States. But after more than a year of challenges and disagreements, it seems that the startup has abandoned the original idea of directly owning infrastructure alongside its two partners. According to the Financial Times, OpenAI now prefers to rely on third-party providers and lease capacity in the long term.

This is a sensible idea for the startup, which is burning through cash and has reportedly missed internal revenue targets in recent months. But it has also caused chaos among its partners and put its reliability into question. According to the report, OpenAI has "in practice... abandoned the joint venture," choosing instead large bilateral deals with Oracle and more. One person involved with Stargate reportedly said the company had "sidelined first-party data centres," while OpenAI itself admitted that Stargate is merely an "umbrella for our compute strategy."

Stargate’s initial goal was to build 20 data centers, with the first project at Abilene, Texas, already operational. However, the three partners reportedly squabbled among themselves for months as they could not agree on who would have ultimate control of the planned data centers. In the end, SoftBank agreed to own and develop the Texas data center, while OpenAI would design and operate it on a long-term lease.

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Other Stargate projects located in other areas have also been hit by uncertainties. The UK government signed a deal with OpenAI, among other partners, to build a data center in the UK, but the startup has put it on hold earlier this month. It cited “restrictive regulations” and “high energy costs” as the reason behind the move, but UK AI Minister Kanishka Narayan told the Financial Times that the “only thing that has changed [since] the moment of those commitments…has been the financing environment for OpenAI.”

All these changes have got some partners “feeling let down and misled by OpenAI,” a person familiar with Microsoft’s decision said. Thankfully, the software giant has stepped in on some of the projects that the startup has supposedly abandoned. One source told the publication that money is not unlimited, no matter what Sam Altman might say, while another said that they prefer Microsoft over OpenAI as a tenant, as “they are more creditworthy.”

Even though OpenAI has made a name for itself in AI, the startup has not turned a profit since it was founded in 2015. Many institutions believe in its potential, though, with the firm securing $110 billion in its latest funding round — the biggest amount secured in Silicon Valley history and $10 billion more than what the company initially targeted. Still, some analysts estimate that it could run out of cash by mid-2027 with the massive amounts of money it’s been throwing around to secure more compute.

Anthropic CEO Dario Amodei criticized moves like this, saying that some of his company’s rivals are pushing infrastructure investments too far. However, OpenAI says that it’s ahead of the exponential compute curve, allowing it to have an advantage over everyone else. For example, Anthropic has had to limit access to some features on its various products due to limited resources, and Amodei has had to spend more on securing capacity to satisfy the increasing demand

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Jowi Morales is a tech enthusiast with years of experience working in the industry. He’s been writing with several tech publications since 2021, where he’s been interested in tech hardware and consumer electronics.

10 Comments Comment from the forums

rluker5

This story works well with this recent one where OpenAI cut its exclusivity with Microsoft so it could use other companies' servers: https://www.tomshardware.com/tech-industry/microsoft-and-openai-end-exclusivity-agreement-opening-up-potential-partnerships-with-amazon-and-google-microsoft-will-continue-to-receive-revenue-share-through-2030If OpenAI can contract out their computing needs everywhere, it makes contracting out their computing needs easier.
And perhaps OpenAI couldn't find a way to make dedicated servers profitable for their uses or found funding difficult so they pass these problems on to some other companies. But what does that mean for this old funding circle:
https://substackcdn.com/image/fetch/$s_!F_Nk!,w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F442cdfc2-1561-4207-b487-466517454b9f_800x815.jpegI know there must be newer versions but this one still shows the importance of OpenAI buying hardware. Just renting it changes a lot of things.

Also, I may be looking in the wrong places so maybe I'm getting a skewed image (also I'm old enough to remember getting free dialup, so that can't help) so I'm tossing this under a spoiler

https://www.visualcapitalist.com/wp-content/uploads/2025/04/How-People-Use-Gen-AI-in-2025_Site.jpgIf this is what is driving revenue from personal use then all of the revenue must be coming from professional uses whatever they are. This is basically a list of worthless stuff that few would miss if they had to pay for it.

Edit: Concerning this list: some older among us might remember when search engines focused on giving us the best results we asked for quickly, before they became more profit oriented. I see no reason to believe that the same won't happen with AI.

Reply
SSGBryan

rluker5 said:
But what does that mean for this old funding circle
It means Oracle is screwed.
Reply
das_stig

Oh please let the Ai bubble burst badly and see this whole fragile house of cards come crumbling down, all the big players lose billions and the greedy investors who threw money at them! They are in no small part responsible for whole energy price crisis and resource shortages!
Reply
Marlin1975

das_stig said:
Oh please let the Ai bubble burst badly and see this whole fragile house of cards come crumbling down, all the big players lose billions and the greedy investors who threw money at them! They are in no small part responsible for whole energy price crisis and resource shortages!

I want it to burst as well but interest rates are still generally low so the "free" money is still coming in. OpenAI just got another 100+ billion round of funding. They are able to do this as these AI/Hardware stocks keep going up so they can use them to fund other AI that causes their stockl to go up and so on.

My bigger worry is a LOT of 401ks are tied up in this as well. You losing half of 250k is worse than going from 4 billion to 2.
Reply
bit_user

Marlin1975 said:
I want it to burst as well but interest rates are still generally low so the "free" money is still coming in. OpenAI just got another 100+ billion round of funding.
That closed at the end of March, so it won't have accounted for news that's come out since then. And don't forget that Musk's lawsuit against OpenAI is now in the testimony phase.

Marlin1975 said:
My bigger worry is a LOT of 401ks are tied up in this as well. You losing half of 250k is worse than going from 4 billion to 2.
Depends on how you have it allocated. First of all, I think 401(k)'s can't invest in startups? I think they're usually limited to more traditional securities, like stocks and bonds. But, let's say you invested it aggressively and that means it's got a bunch of Nvidia, Meta, Microsoft, Oracle, and Google in it. So, yeah, you'd still be pretty heavily exposed.
Reply
FoxtrotMichael-1

das_stig said:
Oh please let the Ai bubble burst badly and see this whole fragile house of cards come crumbling down, all the big players lose billions and the greedy investors who threw money at them! They are in no small part responsible for whole energy price crisis and resource shortages!
Unfortunately this perspective is naive at best. People who are removed from the tech industry don’t really understand how transformative this technology is. I build AI agents professionally and most people are shocked at how much money companies are willing to spend on tokens. Even medium sized corps are spending $1M a month on tokens and willing to go higher for the productivity gains. Many technical teams will never give up their newfound agentic coding practices. What I’m saying is that reports of a “bubble” are highly exaggerated by people who, frankly, just have no idea what’s going on. Will the investments slow down and the build-out slow? Absolutely. Will some of the players currently overvalued in the build-out space lose half of their valuation? Probably. But the idea that the bubble will burst and everything will go back to normal is just a pipe dream.
Reply
SSGBryan

bit_user said:

Depends on how you have it allocated. First of all, I think 401(k)'s can't invest in startups? I think they're usually limited to more traditional securities, like stocks and bonds. But, let's say you invested it aggressively and that means it's got a bunch of Nvidia, Meta, Microsoft, Oracle, and Google in it. So, yeah, you'd still be pretty heavily exposed.
You don't have to be aggressively invested. Anything that is showing any growth has a lot of this.

You don't even want to think about index funds that are built around things such as the S&P 500. I have been digging through the "safest" index funds that are supposed to be relatively "safe" from wild swings, like dividend index stock funds.

Almost ALL of the stock growth in the S&P 500 over the past 4 years is due to the "magnificent seven". They go south and everything goes down.
Reply
das_stig

FoxtrotMichael-1 said:
Unfortunately this perspective is naive at best. People who are removed from the tech industry don’t really understand how transformative this technology is. I build AI agents professionally and most people are shocked at how much money companies are willing to spend on tokens. Even medium sized corps are spending $1M a month on tokens and willing to go higher for the productivity gains. Many technical teams will never give up their newfound agentic coding practices. What I’m saying is that reports of a “bubble” are highly exaggerated by people who, frankly, just have no idea what’s going on. Will the investments slow down and the build-out slow? Absolutely. Will some of the players currently overvalued in the build-out space lose half of their valuation? Probably. But the idea that the bubble will burst and everything will go back to normal is just a pipe dream.
as I work in finance I see what Ai is doing and it's frightening how much relies on it to get it right, which of course relies on the coding and formulas and even that isn't guaranteed to be human, if any left being employed with that level of skill and intelligence, as the god like fat cat bosses drive to replace anybody and everybody with a bot, even senior management are not safe.
Reply
Marlin1975

bit_user said:
That closed at the end of March, so it won't have accounted for news that's come out since then. And don't forget that Musk's lawsuit against OpenAI is now in the testimony phase.

Depends on how you have it allocated. First of all, I think 401(k)'s can't invest in startups? I think they're usually limited to more traditional securities, like stocks and bonds. But, let's say you invested it aggressively and that means it's got a bunch of Nvidia, Meta, Microsoft, Oracle, and Google in it. So, yeah, you'd still be pretty heavily exposed.

Yea those, plus Hynix, sandisk, etc..., are all over the Top 100 S&P. And vastly overpriced IMO.

I think it was over half of the S&Ps growth is due to just 10 stocks. The point of the S&P was the "don't put all your eggs in one basket" but I think even thats broken now.
Reply
SSGBryan

Marlin1975 said:
Yea those, plus Hynix, sandisk, etc..., are all over the Top 100 S&P. And vastly overpriced IMO.

I think it was over half of the S&Ps growth is due to just 10 stocks. The point of the S&P was the "don't put all your eggs in one basket" but I think even thats broken now.
It is.

Remove the "magnificent seven" and the S&P 500 flat lined four years ago.
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