In its second day of operation, the Trump administration announced a $500 billion private sector initiative called Stargate intending to build AI infrastructure across the United States and create over 100,000 U.S. jobs. But questions about the project abound.
Pres. Trump was joined by Larry Ellison, chairman of Oracle, Sam Altman, CEO of OpenAI, and Masayoshi Son, the CEO of Softbank at a White House news conference to announce the project, dubbed Stargate.
Stargate has $100 billion for immediate deployment, with the rest planned over four years. The project includes the construction of 20 data centers, each 500,000 square feet, with the first under construction in Abilene, Texas and ten total under construction.
During the press event at the White House, Ellison talked of an AI he was particularly fond of, maintaining electronic health records and better understanding the condition of their patients and being able to provide health care plans that are much better than they otherwise would be.
“A doctor in Indian River Reservation would be able to see how a doctor at Memorial Sloan Kettering would treat the patient, or a doctor at Stanford would treat the patient,” Ellison said. “We actually provide all of that information, all of that guidance, to the doctors who are treating cancer patients or patients of any other kind of disease made possible by AI.”
But there is the question of what Oracle brings to the Stargate table. It doesn’t build cloud servers and the bulk of its data center locations for its Oracle Cloud Infrastructure are in colocation facilities or leased wholesale data centers.
“Leasing has always been the preference over building its own. Oracle has recently increased its focus on cloud services and ramped up its capex, but I’ve not seen evidence that the strategy of leasing rather than building has changed,” said John Dinsdale, chief analyst and research director for Synergy Research Group.
Ellison appears to be taking the lead in this effort, and he’s the wrong one for this role, argues Rob Enderle, principal analyst with The Enderle Group. “It’s not that he can’t execute, it’s just that he’s been removed from technology for a while. This is probably a huge step too far for him, given his more recent background and level of engagement,” he said.
Another question is the role for OpenAI. It still hasn’t figured out how to monetize ChatGPT and the company is bleeding money, requiring a significant cash infusion/investment from Microsoft.
ChatGPT partner Microsoft is conspicuously absent from the announcement. This prompted speculation on X that the two companies were parting ways, a rather difficult thing to do given that Microsoft owns a 49% stake in OpenAI.
For its part, Microsoft issued a glowing statement stating that their partnership remains in place through 2030 and that OpenAI had made recent contribution to the Azure service. But CEO Satya Nadella did get in a little dig in an interview with CNBC when the issue of funding the $500 billion project. “Look, all I know is, I’m good for my $80 billion,” he said, a reference to a recent promised investment of $80 billion in Microsoft data centers.
Another missing player is Nvidia, which is usually involved in everything AI. Oracle has made a significant investment in deploying Nvidia product in its data centers, so you think that they would have been some involvement. But no, all an Nvidia spokesperson had to say was “Nvidia is delighted to push the limits of computing as OpenAI discovers the next frontier of AI.”
The news has focused on the three principles, but there is a fourth partner, MGX, and investment firm established by the government of Abu Dhabi to channel investments into AI-driven technologies and startups. It owns the AI firm G42 and Microsoft recently made a $1.5 billion investment in the company.
Not everyone is happy with deal. Pres. Trump’s right-hand man Elon Musk took to X to lambaste two of the participants in the deal, stating he had it on “good authority” that Softbank had less than $10 billion secured and called Altman a “swindler.”
Musk has a competitive generative AI service to ChatGPT called xAI, so he’s hardly a neutral party in all of this. He is currently embroiled in a lawsuit with OpenAI, claiming that OpenAI has engaged in anticompetitive practices, including discouraging investors in OpenAI from backing AI rivals.
Finally, there is more than just a little cynicism surrounding the announcement from multiple parties. “This seems more like a publicity stunt that they hope will help them figure out how to raise that capital given there is no way SoftBank has that money. Moreover, it shows how expensive it is in this race to AGI and how high the stakes are for someone to try and get there first then figure out how to monetize,” said Ben Bajarin, CEO and principal analyst with Creative Strategies.
“It is all too easy to wave around a big number that has no details or definitions attached to it. There is a long history of politicians and some parts of the IT industry claiming numbers that turn out to be marketing smoke and mirrors,” said Dinsdale.
“I think the odds are this is this is never gonna get completed. And I think that probably is a good thing,” said Enderle.
Source:: Network World