Stargate was to be the world’s biggest AI investment: a $500bn infrastructure project to “secure American leadership in AI”. Never shy of hyperbole, its key backer, the ChatGPT-maker OpenAI, promised “massive economic benefit for the entire world” with facilities to help people “use AI to elevate humanity”.
Now, OpenAI appears to be dropping out of a part of the deal – the expansion of a flagship datacentre stretching across a swathe of land in Abilene, Texas, which has become one of the most visible manifestations of a frenzy of investment in the chips and power plants required to build and run AI. There has been a breakdown in negotiations over project financing, as well as the timeline of when the expanded capacity might come online.
This may be fine for OpenAI; it can presumably find other datacentres. It is less fine for OpenAI’s partner on the project, Oracle, which has already spent billions on hardware for the site. It is one of a number of cracks appearing in the capital side of the AI economy that are making investors rather nervous.
Both companies have said the development will not derail their AI plans. They also said that a month ago, when a different $100bn deal melted down between OpenAI and Nvidia, the world’s biggest maker of the chips that train AI models and respond to the billions of questions people ask them daily.
The fate of such deals for the global economy is only increasing in importance. Future datacentre leases agreed by the largest cloud computing companies (including Amazon, Oracle and Microsoft) are up nearly 340% in two years and now top $700bn, according to Bloomberg. It is a lot of money if the technology does not start delivering on its promise to supercharge economic productivity. On Friday, more than three years since the launch of ChatGPT unleashed the AI hype, the UK reported zero GDP growth for January.
On Monday, the Guardian exposed another fissure in the AI edifice. An investigation found the UK’s flagship AI deals, many announced with great fanfare during Donald Trump’s state visit last September, are not as they were described in government and corporate press releases. Key projects are delayed or improbable, crucial “investments” are in fact vague agreements between mostly US tech companies, desperately being spun by ministers as an engine for economic growth.
If the cracks in this datacentre boom widen, consequences range from Britain ending up without the AI infrastructure it needs to keep up in the global economy to the more grave risk that the entire AI bubble bursts in a replay of the 2001 dotcom crash that could knock the world economy sideways.
“There has been a lot of blind optimism around the buildout of AI infrastructure,” said Andy Lawrence, the executive director of research at the Uptime Institute, which inspects and rates datacentres. “While there is an…
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