Devoured - April 30, 2026
OpenAI has effectively abandoned first-party Stargate data centers in favor of more flexible deals (5 minute read)

OpenAI has effectively abandoned first-party Stargate data centers in favor of more flexible deals (5 minute read)

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OpenAI has abandoned plans to build its own data centers through the Stargate joint venture, opting instead to lease compute capacity as cash flow concerns mount.

What: OpenAI has effectively backed away from Stargate, a $500 billion joint venture with Oracle and SoftBank announced in early 2025 to build 20 AI data centers, and is now leasing compute from third-party providers instead of owning infrastructure directly. The partners couldn't agree on who would control the planned facilities, and OpenAI has put projects in the UK and Norway on hold, with Microsoft stepping in to take over some leases.
Why it matters: This shift reveals the financial pressures facing even the most high-profile AI startups, with OpenAI potentially running out of cash by mid-2027 despite raising $110 billion, and highlights the advantage established tech companies have with steady revenue streams to fund expensive infrastructure projects.
Takeaway: If you're building AI products, consider the infrastructure model carefully—even OpenAI is finding that owning data centers may not be economically viable compared to leasing capacity from providers with stronger balance sheets.
Original article

In early 2025, OpenAI announced Stargate, a joint venture with Oracle and SoftBank, which aimed to invest $500 billion in AI data centers in the United States. But after more than a year of challenges and disagreements, it seems that the startup has abandoned the original idea of directly owning infrastructure alongside its two partners. According to the Financial Times, OpenAI now prefers to rely on third-party providers and lease capacity in the long term.

This is a sensible idea for the startup, which is burning through cash and has reportedly missed internal revenue targets in recent months. But it has also caused chaos among its partners and put its reliability into question. According to the report, OpenAI has "in practice... abandoned the joint venture," choosing instead large bilateral deals with Oracle and more. One person involved with Stargate reportedly said the company had "sidelined first-party data centres," while OpenAI itself admitted that Stargate is merely an "umbrella for our compute strategy."

Stargate's initial goal was to build 20 data centers, with the first project at Abilene, Texas, already operational. However, the three partners reportedly squabbled among themselves for months as they could not agree on who would have ultimate control of the planned data centers. In the end, SoftBank agreed to own and develop the Texas data center, while OpenAI would design and operate it on a long-term lease.

Other Stargate projects located in other areas have also been hit by uncertainties. The UK government signed a deal with OpenAI, among other partners, to build a data center in the UK, but the startup has put it on hold earlier this month. It cited "restrictive regulations" and "high energy costs" as the reason behind the move, but UK AI Minister Kanishka Narayan told the Financial Times that the "only thing that has changed [since] the moment of those commitments…has been the financing environment for OpenAI."

It has also done the same for another Stargate project in Narvik, Norway, with Microsoft stepping up to take over the lease for the site. OpenAI will then lease compute capacity from Redmond, instead of getting it directly from Nscale, the British company that developed the site and also worked on the canceled UK project.

All these changes have got some partners "feeling let down and misled by OpenAI," a person familiar with Microsoft's decision said. Thankfully, the software giant has stepped in on some of the projects that the startup has supposedly abandoned. One source told the publication that money is not unlimited, no matter what Sam Altman might say, while another said that they prefer Microsoft over OpenAI as a tenant, as "they are more creditworthy."

Even though OpenAI has made a name for itself in AI, the startup has not turned a profit since it was founded in 2015. Many institutions believe in its potential, though, with the firm securing $110 billion in its latest funding round — the biggest amount secured in Silicon Valley history and $10 billion more than what the company initially targeted. Still, some analysts estimate that it could run out of cash by mid-2027 with the massive amounts of money it's been throwing around to secure more compute.

Anthropic CEO Dario Amodei criticized moves like this, saying that some of his company's rivals are pushing infrastructure investments too far. However, OpenAI says that it's ahead of the exponential compute curve, allowing it to have an advantage over everyone else. For example, Anthropic has had to limit access to some features on its various products due to limited resources, and Amodei has had to spend more on securing capacity to satisfy the increasing demand

The biggest difference between startups, like OpenAI and Anthropic, and their more established rivals, like Microsoft, Google, Meta, and Amazon, is cash flow. The startups still rely on external funding to fuel their growth, while the big tech companies have billion-dollar revenue that they can rely on to pour into expensive hardware and infrastructure projects.