Microsoft Modified Data Centre Strategy on OpenAI for $500B Stargate JV

Arm, Microsoft, Nvidia, Oracle, and OpenAI will be the primary key technology partners of Stargate

Microsoft announced on Tuesday that it had modified a few key terms of the agreement with OpenAI, which owns roughly 49% of OpenAI’s equity, having invested US$13 billion after OpenAI announced that it is going to get into a joint venture with Oracle and Japan’s SoftBank Group to build up to $500 billion worth of new AI data centers in the United States.

The leaders of the ‘Stargate’ effort met at the White House on Tuesday to announce the deal, claiming that this venture will help the United States stay ahead of China and other competitors in the global AI race, using the Nividia chips.

According to OpenAI, the Stargate project will also include some of the leading tech companies in the United States.

They announced on X, a social media platform, that Arm, Microsoft, Nvidia, Oracle, and OpenAI will be the primary key technology partners, and SoftBank, OpenAI, Oracle, and MGX will act as the equity financiers.

OpenAI announced that SoftBank and OpenAI will lead the project, and SoftBank’s CEO, Masayoshi Son, will be its chairman.

The three businesses would first invest $100 billion in the so-called Stargate initiative, with the amount increasing to $500 billion over the next four years.

Following the announcement of Stargate, Tokyo-based Softbank group’s stock shot up more than 8% on Wednesday.

The new venture intends to build essential data and computing infrastructure needed to drive the development of artificial intelligence to create over 100,000 American jobs ‘almost immediately.’

This initiative is one of Trump’s first significant business initiatives since he returned to office on January 19. It aims for the United States to create new strategies to maintain its technological advantage over China in artificial intelligence.  

During the White House event, Trump stated that their potential competitors are China and a few other countries.

OpenAI stated that the construction process is currently in progress, starting in Texas, and they are evaluating potential sites worldwide for additional campuses as they are finalizing formal agreements. OpenAI assured that Stargate will not only support the re-industrialization of the United States but also provide a strategic capacity to safeguard the national security of America and its allies.

Since 2019, Microsoft has entered into agreements with OpenAI that granted the Redmond, Washinton-based business the exclusive authority to develop new computing infrastructure for OpenAI. In a blog post, Microsoft stated that it has permitted OpenAI to expand its capabilities, primarily for research and model training.

That made it possible for OpenAI to collaborate with Oracle.

The person familiar with the deal said that OpenAI has an equity position, governance rights, and operational control in Stargate, a joint venture set up as a new company. The person added that it will have a separate board where the founding members and its chief executive will choose the board’s members. The venture will also have other investors like MGX, a company based in the United Arab Emirates.

Microsoft stated it still has the exclusive rights to offer OpenAI’s API. API is an application programming interface, the primary means by which software developers and business clients buy OpenAI services. It means that Oracle cannot host OpenAI’s primary revenue stream.

Oracle did not answer immediately to a request for comment on Microsoft statements.

Microsoft claimed it has a revenue-sharing arrangement that flows both ways with OpenAI.

According to Microsoft, the primary components of the partnership will not change during the term of the deal, which runs until 2030. Microsoft still has exclusive access to OpenAI’s APIs, revenue-sharing plans, and intellectual property (IPs).

Microsoft also stated that OpenAI recently made a new, significant Azure commitment that will continue to support all the OpenAI products and training, referring to the Microsoft Azure cloud computing service.