Deep Dive Into Stargate: Where Does the $500 Billion Fund Come From?

The largest AI infrastructure project, Stargate, is generating buzz on the stock market but also raising concerns, particularly from Elon Musk and Anthropic CEO Dario Amodei. The project has secured much less capital than what is claimed, leading many to question where the $500 billion actually came from.

On Tuesday, OpenAI, SoftBank, and Oracle committed up to $500 billion to the Stargate project over the coming years. Microsoft, NVIDIA, and Oracle will serve as key initial technology partners.

This massive AI initiative has already boosted related stocks: NVIDIA and Microsoft saw gains of over 4%, Oracle rose 6.75%, and SoftBank's affiliate, Arm, surged nearly 16% on Wednesday.

As the first major AI initiative after Trump's presidency, Stargate's significance is undeniable. However, its high costs and practicality have sparked debates. Musk directly countered the project's feasibility, leading to a back-and-forth with OpenAI's Sam Altman, with Anthropic's CEO also pouring cold water on the idea.

They don't actually have the money, Musk commented on X. SoftBank has well under $10B secured. I have that on good authority.

It's hard to make head or tail of OpenAI's new Stargate joint venture with SoftBank, Oracle, and other partners, said Anthropic CEO Dario Amodei in an interview. It's not clear how much money is actually involved and how much of that was committed. It's also unclear what the government's involvement in the project will be.

Musk's remarks triggered a response from Altman, who fired back on X: This is great for the country. I realize what is great for the country isn't always what's optimal for your companies, but in your new role, I hope you'll mostly put America first.

It has been reported that OpenAI and SoftBank will each contribute $19 billion to the Stargate project, with Oracle and MGX contributing $7 billion. The four founding companies will inject a total of $45 billion, with the remaining funds to come from new investors and debt financing.

Altman confirmed on Wednesday that OpenAI and SoftBank would each hold a 40% stake in the joint venture. He also noted that the remaining funds would come from limited partners and various forms of debt financing, some of which could eventually be publicly traded.

Given that OpenAI is still operating at a loss, it may need to raise $19 billion through equity or debt financing. Altman stated that OpenAI would be a customer of Stargate and would have operational control. However, as Stargate raises additional funds, OpenAI could lose some control over the project.

In terms of technological cooperation, it's been reported that OpenAI and Oracle have not revealed many details, but Altman has informed colleagues that the goal is to produce relatively cheap servers to assist OpenAI in developing its technology.

According to the Financial Times, sources suggest that a significant portion of the initial $100 billion in funding will come from undisclosed new investors.

One source added that the funding will be composed of equity from the founding partners and co-investors, as well as debt, and that the money will be deployed immediately.

There has also been speculation that Microsoft, OpenAI's strategic partner, might contribute funds. Sources indicate that Satya Nadella and Altman have had multiple discussions about the latter's plans to expand computing power, and Microsoft could invest in OpenAI's infrastructure projects, including Stargate.

However, during an interview on Wednesday, Microsoft CEO Nadella denied this, confirming that Microsoft's $80 billion investment in AI for fiscal 2025 will be focused annually on building Azure to support AI.

All I know is, I'm good for my $80 billion, Nadella told CNBC when asked about Musk's remarks suggesting the project lacked sufficient funding.

Following Nadella's comments, Microsoft issued a statement clarifying its position: it supports the Stargate project, and any statements regarding the $80 billion infrastructure investment were meant to emphasize their commitment, not to respond to any individuals or claims.