Is OpenAI Building An AI Empire on Borrowed Infrastructure?

OpenAI’s Stargate project has committed $500 billion to partnerships with Nvidia, Oracle, and AMD. That is a huge business investment for sure. But, OpenAI doesn’t own most of the computers tasked with running its AI. 

Technically, they’re renting these computers from the very companies investing in OpenAI, which weaves a messy web of inter-dependency. At any moment of chaos, if these suppliers change priorities or negotiate differently, OpenAI could lose access to the infrastructure that powers its AI. 

Partners or Puppet Masters? 

OpenAI’s partnership with these corporations is a tricky arrangement. Nvidia invests billions while selling OpenAI’s GPUs, so Nvidia benefits whether OpenAI succeeds or struggles. 

On the other hand, Oracle has locked OpenAI into a long term and expensive chip contract, that can’t easily adjust or keep pace with if the tech improves. But, the best of the deals is the one that AMD has cracked. It gives them a potential ownership in OpenAI while OpenAI depends on AMD’s hardware. 

This arrangement blurs the line between partnership and control. OpenAI’s investors have a financial incentive that won’t always stay in line with the company’s operational needs. If hardware underperforms or the cost shifts, it may have to choose between operational efficiency and investors’ stake. This is a classic tension in mega-scale tech deals, where outsourced power comes at the cost of autonomy. 

More Such Deals? 

Sam Altman’s statement that more deals like Stargate Project are in the pipeline, signals that OpenAI is doubling down on the approach of building a castle on a web of inter-dependencies. Stargate Project itself isn’t that of a masterstroke, as it has played the bet on a future which is so uncertain that could make the current arrangement irrelevant in giffy. 

Stargate is spending $500 billion assuming that AI demand will keep growing (which it will be) and justify all that infrastructure. But competitors like Google, Meta, and Anthropic are building their own systems. If AI becomes more open and widely available (Again, which it will be), OpenAI could be stuck with a massive cost for a hardware it wouldn’t really need anymore. 

For instance, the deal with Oracle, the 15-year chip contract assumes that AI in 2040 would require the same tech it does today. Sam Altman may have announced the occurrence of more such deals as a WIN, but the more such multi-billion deals stack-up, the higher the stakes of OpenAi getting stuck with a stagnant arrangement. 

Sam Altman’s announcement of “more deals like Stargate”, is audacious at best. Because if on one hand it magnifies OpenAi’s dominance, on the other hand it also doubles down the fragile setup of dependency. 

OpenAI’s dominance depends on renting from suppliers who are simultaneously investors, creating a high-stakes web where one misstep could ripple through billions of dollars and reshape the AI landscape.