Sam Altman OpenAI’s $850 billion in planned buildouts, bubble concern

ABILENE, Texas — Sam Altman stood on a patch of hot Texas dirt, the kind that turns to dust storms on dry days and mud slicks after a sudden rain. Behind him stretched the outlines of what will soon be a massive data center complex in the west-central part of the state, where heavy wind often meets extreme heat.

It was a fitting backdrop for the OpenAI CEO to unveil what he calls the largest infrastructure push of the modern internet era: a 17-gigawatt buildout in partnership with Oracle, Nvidia, and SoftBank.

In less than 48 hours, OpenAI has announced commitments equal to 17 nuclear plants or about nine Hoover Dams. The plan will require the amount of electricity needed to power more than 13 million U.S. homes.

The scale is staggering, even for a company that’s raised a record amount of private market cash and seen its valuation swell to $500 billion. At roughly $50 billion per site, OpenAI’s projects add up to about $850 billion in spending, nearly half of the $2 trillion global AI infrastructure surge HSBC now forecasts.

Altman understands the concern. But he rejects the idea that the spending spree is overkill.

“People are worried. I totally get that. I think that’s a very natural thing,” Altman told CNBC on Tuesday from the site of the first of its mega data centers in Abilene. “We are growing faster than any business I’ve ever heard of before.”

Altman insisted that the building boom is in response to soaring demand, highlighting the tenfold jump in ChatGPT usage over the past 18 months. He said a network of supercomputing facilities is what’s required to maximize the capabilities of AI.

“This is what it takes to deliver AI,” Altman said. “Unlike previous technological revolutions or previous versions of the internet, there’s so much infrastructure that’s required, and this is a small sample of it.”

The biggest bottleneck for AI isn’t money or chips — it’s electricity. Altman has put money into nuclear companies because he sees their steady, concentrated output as one of the only energy sources strong enough to meet AI’s enormous demand.

Altman led a $500 million funding round into fusion firm Helion Energy to build a demonstration reactor, and backed Oklo, a fission company he took public last year through his own SPAC. 

Critics warn of a bubble, pointing to how companies like Nvidia, Oracle, Broadcom and Microsoft have each added hundreds of billions of dollars in market value on the back of tie-ups with OpenAI, which is burning cash. Nvidia and Microsoft are now worth a combined $8.1 trillion, or equal to about 13.5% of the S&P 500.

Skeptics also say the system looks like a circular financing model. OpenAI is committing hundreds of billions of dollars to projects that rely on partners like Nvidia, Oracle, and SoftBank. Those companies are simultaneously investing in the same projects and then getting paid back through chip sales and data center leases.

Friar has a different perspective, arguing that the entire ecosystem is banding together to meet a historic surge in compute needs. Big tech booms, Friar noted, have always required this kind of bold, coordinated infrastructure buildout.

Altman added that such cycles of overinvesting and underinvesting have marked every past technological revolution. Some people, he said, will surely feel the pain.

“People will get burned on overinvesting and people also get burned on underinvesting and not having enough capacity,” he said. “Smart people will get overexcited, and people will lose a lot of money. People will make a lot of money. But I am confident that long term, the value of this technology is going to be gigantic to society.”

OpenAI’s partners are betting big on that future. Oracle is even reshaping its leadership around it. On Monday, the company promoted Clay Magouyrk and Mike Sicilia to CEO roles, replacing Safra Catz. Magouyrk ran cloud infrastructure and Sicilia was president of Oracle Industries.

“When you think about why make a transition now, it’s really around Oracle’s being set up for success,” Magouyrk told CNBC. “I only see more and more demand from the end users … what looks like near infinite demand for technology.”

Nvidia is fronting equity alongside its chips, including the new Vera Rubin accelerators meant to power the next wave of AI workloads. The Abilene facility is being leased by Oracle.

“Folks like Oracle are putting their balance sheets to work to create these incredible data centers you see behind us,” OpenAI CFO Sarah Friar said in an interview on site.

She explained that OpenAI will pay operating expenses for the data…