Microsoft & OpenAI: Data Center Rift Signals a Tech Split?

Microsoft is taking over a data center construction project in Texas after OpenAI decided not to pursue it. This strategic move positions the two companies as neighbors at one of the nation’s largest complexes for running artificial intelligence. Data center developer Crusoe said Friday it is working with Microsoft to build two new “AI factory” buildings and an on-site power plant in Abilene, Texas, right next to where Crusoe has been building an even larger computing campus for OpenAI and Oracle.

OpenAI’s existing project, the flagship of a broader initiative called Stargate, is so massive that former President Donald Trump was the first to officially announce it, immediately after his inauguration last year, to signal AI investments he called a “resounding declaration of confidence in America’s potential.” Microsoft, which was once OpenAI’s exclusive cloud computing provider and still holds roughly a 27% stake in the ChatGPT maker, is increasingly focused on AI development separately, despite sharing the same land.

Crusoe has already completed two buildings for OpenAI and its other cloud partner, Oracle, supplying a surge of computing power that helps build and operate technologies like ChatGPT. SoftBank was also an investment partner. Crusoe is still completing six more buildings for OpenAI and Oracle, due to be completed by the end of this year. OpenAI said earlier this month that it dropped plans to expand its Abilene project even further. “Our flagship Stargate site is one of the largest AI data center campuses in the United States,” said Sachin Katti, OpenAI’s head of compute infrastructure, in a post on X. “We considered expanding it further, but ultimately chose to put that additional capacity in other locations.”

Katti added that OpenAI has more than half a dozen sites under development across the United States, including one it is building with Oracle in Wisconsin.

Microsoft’s additional two Abilene facilities announced Friday will bring the total number to 10 data center buildings, expected to supply a stunning 2.1 gigawatts of computing capacity, from what was once a vast tract of mesquite shrub lands, home to coyote and roadrunners. Originally planned as a facility to mine cryptocurrency, developers pivoted and expanded their designs after ChatGPT sparked an AI boom. Crusoe co-founder and CEO Chase Lochmiller said in a written statement that a new power plant attached to the Microsoft project will be able to generate 900 megawatts to “continue building the industrial foundation for American AI — at a velocity the industry has never seen.”

That will be larger than the existing 350-megawatt, gas-fired power plant attached to the OpenAI and Oracle project. Oracle has previously described that on-site plant as a backup source of power, since the data centers primarily draw from the region’s electricity grid, which includes power supplied by nearby wind farms.

The AI race has been complicating tech companies’ commitments to reduce greenhouse gas emissions, most of which come from the burning of gas, oil, and coal, and drive climate change. “We’re burning gas to run this data center,” OpenAI CEO Sam Altman said while visiting Abilene last year, adding that “in the long trajectory of Stargate” the hope is to rely on many other power sources.

Microsoft's decision to take over the Texas project and OpenAI's apparent withdrawal from expansion at the same location suggest a shift in the dynamics between the two companies, despite their physical proximity and historical collaboration. The future of AI and its environmental impact remain key topics in this evolution.