Oracle pushes back on reports of scrapped data center expansion
When OpenAI and Oracle Corporation (ORCL) announced a massive expansion in September that would build five new AI data center sites in the United States as part of the Stargate project, it sent Oracle's stock soaring and briefly made founder Larry Ellison the richest man in the world.
But potential cracks in the partnership began to show at the end of last year when Wall Street started raising red flags over OpenAI CEO Sam Altman's plan to spend $1.7 trillion over the next eight years with no clear path to generating the kind of revenue to support that kind of massive expenditure.
This in turn led some analysts to question Oracle's deal with OpenAI, especially since it was also facing scrutiny over its own mounting debt levels.
“Clearly there's been a reversal in terms of the market's perception of OpenAI in the last couple of months,” BNB Paribas analyst Stefan Slowinski told Yahoo Finance in December. “The OpenAI ecosystem obviously has been suffering as a result.”
On Friday, Bloomberg reported that Oracle and OpenAI have ended their plans for an AI data center expansion in Abilene, Texas after struggling to gain sufficient financing and also "OpenAI's changing needs."
Oracle had been planning to build 4.5 gigawatts of data center capacity for OpenAI. Oracle and OpenAI are utilizing Nvidia Corporation's (NVDA) semiconductors at Stargate.
According to Bloomberg, Meta Platforms Inc. (META) is eyeing the possibility of leasing the site of the planned expansion in Texas with the site's developer Crusoe. Nvidia spearheaded discussion between Meta and Crusoe, which included paying a $150 million deposit to the developer, as it seeks to have a tenant use its products in the space rather than those of rival Advanced Micro Devices Inc. (AMD), Bloomberg reported.
The $500-billion, 10 gigawatt Stargate initiative was announced by President Trump in January as part of the White House's plans to ramp up domestic AI manufacturing in the US. In addition to Oracle and OpenAI, the Stargate initiative also includes SoftBank Group Corp. (SFTBY).
Oracle pushed back on the reporting about the troubles facing its planned data center expansion in Texas in a post on X on Sunday, calling the recent "media activity" about its Abilene project "false and incorrect."
"First, Crusoe and Oracle are operating in lockstep to deliver one of the world's largest AI Data centers in Abilene at record-breaking pace," the company said. "Two buildings are completely operational and the rest of the campus is on track."
Oracle added that it "has completed leasing for the additional 4.5GW to deliver on our commitments to OpenAI."
OpenAI infrastructure executive Sachin Katti also responded to the Bloomberg article in his own post on X on Friday.
"Our flagship Stargate site is one of the largest AI data center campuses in the United States," Kattie said. "We considered expanding it further, but ultimately chose to put that additional capacity in other locations."
He pointed out that OpenAI has "more than half a dozen sites under development across multiple states, including the site we're building with Oracle in Wisconsin, where the first steel beams went up just this week."