icrosoft may be lapping up OpenAI’s data center leftovers.
The company has agreed to rent data center capacity from neocloud firm Crusoe in Abilene, Texas, that was originally developed for Oracle and OpenAI, according to Bloomberg. The company will reportedly lease out 700 megawatts of capacity adjacent to the Stargate campus.
Microsoft will essentially pick up where OpenAI and Oracle left off after the two companies walked away from talks to lease the site, Bloomberg reported. The reported deal follows OpenAI and Oracle dropping plans to expand their flagship Stargate campus.
OpenAI has faced bumps in the road in its grand plan to spearhead a historic AI infrastructure buildout. In February, the company narrowed its spending expectations for AI compute to $600 billion by 2030, down from $1.4 trillion, amid mounting concerns about its ability to generate revenue.
However, other industry players have different outlooks. Microsoft, for instance, inked $50 billion in commitments to lease server farms in its most recent earnings report. Microsoft’s reported deal is a sign that AI-fueled data center demand is far from slowing down, Andrew Sharp, research lead at Info-Tech Research Group, told The Deep View.
Power and grid capacity are increasingly becoming constraints on this buildout, said Sharp, driving prices up. Oracle, meanwhile, is carrying a far higher debt-to-earnings ratio than other cloud hyperscalers, Sharp noted. To put it plainly, if Oracle can’t fund OpenAI’s projects as aggressively as the hyperscalers fund their own, the so-called “Big Three” – Amazon, Google Cloud, and Microsoft Azure – will make faster gains.
“Microsoft is buying megawatts wherever it can find them,” said Sharp. “Unclaimed power capacity is the new beachfront property, and everyone from hyperscalers to independents is scrambling for whatever's left.”
Our Deeper View
Microsoft’s bid for more power may show that OpenAI isn’t the sole indicator for the state of the AI data center buildout. OpenAI made a lot of big promises and got itself tangled in expensive commitments, unlike its primary rival, Anthropic. Thus far, it has leaned on legacy tech companies and investors to bring its vision to life. Though OpenAI has made itself a fixture in the AI space, the industry shouldn’t look at its success or slip-ups as the only bellwether. Power, compute, and ultimately influence are being shared by a handful of the leading players. Traditional powerhouses like Microsoft, Google, and Amazon have the benefits of significant capital, profitable core businesses, and existing data center footprints.