What's a half-trillion between friends?

Welcome to Cautious Optimism, a newsletter on tech, business, and power.

• 📈 Trending Up: Crime (again) … Netflix prices (again) … tech support for war … Invisible Technologies … The Verge’s paywall … karma … indie media …

• 📉 Trending Down: A lack of political corruption … future stock market levels? … free trade … working at Stripe …

Chart of the Day

Via JP Morgan:

Group Effort

After future White House office-holder Elon Musk rocked a hand gesture interpreted by many as having a fascist history, I’ve been watching how folks outside of tech have reacted.

Inside tech circles, the vibe appears to be, “Elon does silly things sometimes, and anyone freaking out about them is an idiot.” Outside? A sampling:

• /r/IBEW: “There is no more question. This is what the Trumpers have voted for. What are you going to do? Will you stand against this as your oath to the IBEW states? They are going to come for us. Are you with Trump and Elon, or your brothers and sisters?”

• /r/Formula1: “Starting today, we are banning Twitter/X content on r/formula1. We urge all journalists, creators, photographers and other F1 personalities to also make their content available on alternative platforms.”

• /r/Metalcore: “Twitter links are now banned in posts and comments.”

It’s all over the place. Instantly and without formal coordination. A bunch of mods and communities saw what they saw and made a call. (As an aside, don’t go read the forums of healthcare workers if you don’t want more, similar commentary. They are also incensed that the Trump EO freezing Federal hiring is impacting the VA and veteran care more generally.)

While there may be one dominant perspective on X, outside of technology’s personal social network the vibes are very different and more negative. Something to keep an eye on.

Via Malte Schmidt

Project Stargate OpenSoftOracleAIBankMicroMGXsoftNvidiaRM

Reaffirming my views that:

1. AI progress in recent years is material and accelerating

2. The United States or another liberal democracy should win the AI arms race and not an authoritarian regime…

I am pretty excited about Project Stargate.

The gist is that a collection of technology companies (including OpenAI) and capital sources are teaming up to pour $500 billion into AI infra here in the United States. That’s a lot of money, and it will buy a lot of hardware and software to power not only domestic economic growth, but also ensure that we can keep our national AI edge over China which has felt more in doubt lately.

The name Project Stargate should ring a bell. Back in April, reporting dubbed the effort as “a new [Microsoft/OpenAI] AI supercomputer data center headquartered in the U.S. that could cost over $100 billion.” So, Project Stargate has clearly been in the works for some time.

But if there’s a podium to be had, a chance to collect credit for work not personally completed, and a chance to flash huge sums, you’re going to find both Donald Trump (podium, credit), and Masa Son (cash flasher). So it was not a shock that when Project Stargate got announced, Son and Trump and Sam Altman were there. Here’s how the project is playing in the media:

• AP: Trump highlights partnership investing $500 billion in AI

• TC: OpenAI teams up with SoftBank and Oracle on $500B data center project

• CNBC: Microsoft loses status as OpenAI’s exclusive cloud provider

But enough throat clearing, here’s OpenAI’s formal breakdown of the project:

The Stargate Project is a new company which intends to invest $500 billion over the next four years building new AI infrastructure for OpenAI in the United States. We will begin deploying $100 billion immediately. This infrastructure will secure American leadership in AI, create hundreds of thousands of American jobs, and generate massive economic benefit for the entire world. This project will not only support the re-industrialization of the United States but also provide a strategic capability to protect the national security of America and its allies.

$100 billion today, and $400 billion during the rest of Trump’s administration is a lot of money. Here’s a breakdown of who is doing what:

• OpenAI: Equity funding, lead partner (operational responsibility), key initial technology partner

• SoftBank: Equity funding, lead partner (financial responsibility)

• Oracle: Equity funding, key initial technology partner

• Arm, Nvidia, Microsoft: Key initial technology partners

• MGX: Equity funding

On the hardware side specifically, OpenAI writes that as “part of Stargate, Oracle, NVIDIA, and OpenAI will closely collaborate to build and operate this computing system.” Not Microsoft? Nope.

OpenAI did make sure to say in its release that Stargate won’t preclude it using more of Microsoft’s cloud more generally (“OpenAI will continue to increase its consumption of Azure as OpenAI continues its work with Microsoft[.]”). But as CNBC noted above, OpenAI now has more than one cloud buddy.

Microsoft dropped its own notes on the project — here — including a reminder that until 2030 it has “access to OpenAI’s IP, our revenue sharing arrangements and our exclusivity on OpenAI’s APIs all continuing forward,” and that it has moved from an exclusive cloud provider to one with “right of first refusal.”

Fair enough. Microsoft and OpenAI remain close, but are no longer fully glued at the hip. That’s probably good for net AI competition, so I’m in favor of the change.

Not that everyone is thrilled

Via X

Does SoftBank have money? According to its most recent earnings report (new data drops mid-February), here’s the state of play:

Total assets amounted to ¥15,469.4 billion as of September 30, 2024, a decrease of ¥52.5 billion (0.3%) from the previous fiscal yearend.

¥15.47 trillion is worth ~$99 billion. But what about cash?

¥1.66 trillion is worth ~$10.7 billion. Musk claimed that SoftBank has less than $10 billion secured for the deal, which makes sense as I doubt that any company — even SoftBank — is willing to yeet invest ~93% of its cash into a single deal.

But that’s what MGX is for! The last company in our rundown above is a huge bucket of duckets. If you need a refresher, MGX is an Abu Dhabi-built “$100 billion artificial intelligence-focused investment vehicle [that] will have sovereign wealth fund Mubadala and AI company G42 as its foundational partners,” according to CIO.

We have found the money! Or at least a bunch more of it. I don’t think with the corporate backers listed, OpenAI’s own ability to raise cash and generate revenue, that the $500 billion figure is impossible. It may prove illusory, as many headline-grabbing financial pledges have in the past, but it’s at least possible.

What about Anthropic? xAI? Mistral?

They will probably be just fine. We discussed Anthropic’s revenue growth yesterday, which was an impressive 10x last year. It’s also raising even more money from Alphabet ($1 billion) as it looks to raise more from more trad sources ($2 billion).

Mistral for its part is back to making a little noise, which bodes well as the company seemed to fall off the map for a few months there. xAI just raised a truckload of money, so it too should be fine for now.

I expect there to be enough market demand for AI models and AI inference to support a number of large winners. So I think that the Stargate push is really a re-cementing of OpenAI as the current market leader more than it is saving the erstwhile trailblazer from falling behind.

Still, who can top $500 billion? Let’s see.