Stargate: How Microsoft can benefit from Softbank, OpenAI and Oracle’s $500 billion-joint AI project with zero money | Company Business News

Despite investing almost $14 billion in OpenAI and using the startup’s AI models for its next-generation cloud services, Microsoft was mentioned only as a technology partner in a joint venture called Stargate launched by OpenAI, SoftBank Group Corp. and Oracle Corp. Then, in a blog post, the software giant said OpenAI could use rival cloud services to train and run its AI models with Microsoft’s permission, watering down an exclusivity contract.
According to Bloomberg, the flurry of announcements prompted renewed speculation that the Microsoft-OpenAI relationship has frayed somewhat, although each party currently has more to gain together than apart. One thing is clear: Over time, Microsoft has become less willing to spend even more money financing the computing power OpenAI requires to retain a lead in artificial intelligence.
In 2023, Microsoft was close to a deal to invest tens of billions of additional dollars in OpenAI, according to people familiar with the situation. At the time, OpenAI Chief Executive Officer Sam Altman was talking to Microsoft about helping fund a massive expansion of AI infrastructure with investors in Asia and the Mideast. Any Microsoft investment would likely have furthered those ambitions.
Then Altman was briefly fired, exposing instability at the heart of OpenAI. Altman was reinstalled as CEO, but the upheaval prompted Microsoft to abandon plans to invest more money, said one of the people, who requested anonymity to discuss private negotiations. Altman’s infrastructure plans have since changed several times, but Microsoft CEO Satya Nadella had lost enthusiasm for contributing significant sums.
The New York Times previously reported Microsoft’s planned investment in OpenAI.
Microsoft did pump $750 million into OpenAI’s most recent $6.6 billion funding round. But its refusal to make a larger commitment prompted Altman to look for other partners and to chafe against a contractual exclusivity provision that required OpenAI to get all of its cloud capacity from Microsoft through 2030.
Nadella and Altman have had many conversations about the latter’s ambitions to dramatically scale up computing capacity, and Microsoft may invest in an OpenAI infrastructure project, including possibly Stargate, in the future, according to one of the people.
OpenAI needs more computing capacity to fulfill its ambitions, and companies of its current scale don’t generally work with a single partner, according to a person familiar with the situation. The revised deal between OpenAI and Microsoft indicates that the two companies continue to work together closely, the person added.
Microsoft views the revised contract with OpenAI as advantageous, according to people familiar with the company’s thinking. The software giant retains its share of OpenAI’s revenue and is the largest investor in a company that may now become even more valuable — though the size of that stake could change as the startup works to restructure as a for-profit. And Microsoft also still has access to OpenAI models, even if they’re trained in a data center funded by Softbank or Oracle.
The Stargate joint venture and rejiggered partnership with OpenAI also lets Microsoft offload some AI spending onto rivals. That’s a positive development for a company that has pledged to lavish $80 billion this fiscal year on capital expenditures and is monetizing those investments at a slower pace than Wall Street would prefer.
Stargate has already become a lightning rod, with Elon Musk accusing the project’s backers of lacking sufficient funds to pull off their ambitions. “They don’t actually have the money,” Musk wrote on his social media platform X, hours after the announcement. Later, Musk wrote: “On the other hand, Satya definitely does have the money.”
That prompted a rejoinder from Microsoft’s chief.
“All this money is not about hyping AI, but is about building useful things for the real world!” he wrote on X.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess