US AI project Stargate struggles to get off the ground

Six months after its splashy debut at a White House press event, the US$500 billion Stargate project is said to be going nowhere and is now being forced to scale back its lofty ambitions.

A US$500 billion project was unveiled at the White House with much fanfare this past January to kickstart artificial intelligence Projects in the US to make the country more competitive with foreign initiatives.

According to a Wall Street Journal report, the newly formed company charged with making the project happen has yet to complete a single deal for a data center and that SoftBank CEO Masayoshi Son and OpenAI CEO Sam Altman are butting heads over crucial terms of the partnership, including where to build the sites. Oracle was the third partner in this alliance, but it does not appear to be playing a role in this clash. Though, according to Axios, this week Oracle and OpenAI agreed to develop 4.5 gigawatts of additional Stargate data center capacity in the US.

And whereas the trio promised to invest US$100 billion “immediately,” the project is now setting the more modest goal of building a small data centre by the end of this year, perhaps in Ohio.

Such problems hardly come as a surprise. None of the principal partners in this initiative have any serious experience in building hyperscale data centres. Most of Oracle’s Oracle Cloud Infrastructure network is based on colocation, not its own data centers and Oracle is an also-ran in this business. It has just 3 per cent market share of the cloud market.

Cloud titans AWS, Microsoft, Equinix, Digital Reality, Google, Nvidia, and Meta have yet to join the partnership, and their omission makes it hard to take the project seriously because they are the ones with the experience in doing this type of work.

Analysts aren’t surprised at the news. “Big IT projects have a long history of dramatically overpromising and it appears that trend is quickly moving into the world of AI data center-based projects as well. The Stargate project, in particular, also seems to have more of a political bent to it than many other projects so that’s likely complicating matters as well,” said Bob O’Donnell, president and chief analyst with TECHnalysis Research.

“There’s little doubt we will see massive investments by many different organisations to build out AI infrastructure here in the US, but I’m not convinced that individual projects will end up mattering that much in the long run,” he added.

“I have always been skeptical about the huge number that was projected. In the hundreds of billions,” said Patrick Moorhead, CEO & chief analyst with Moor Insights & Strategy. “The only problem was that only a few billion in new funding was raised. And now there’s strife between OpenAI and SoftBank. To be fair, Oracle is part of Stargate now and OpenAI will soak up many GPUs in the Texas facility, but this was already in process when the Stargate announcement happened.”