SoftBank and OpenAI’s $100 billion plan to build large data centers for artificial intelligence in the United States has stalled because rising US tariffs could increase equipment costs, the global economy is unstable, and investors are uncertain of AI’s future.
As cheaper AI models appear, banks and investors have slowed or stopped key funding talks because they are now rethinking whether supporting such a large project will bring enough profits to match the risks involved.
Tariffs and market fears slow talks with SoftBank investors
SoftBank’s founder, Masayoshi Son, and OpenAI’s CEO, Sam Altman, announced the Stargate project in January, which aims to build a large network of AI data centers with an investment of $100 billion that can grow to $500 billion.
However, SoftBank still has not signed any formal financial deals to date because several risks that could hurt the project’s future value and increase its upfront costs are making banks, asset managers, and other supporters nervous.
Similarly, SoftBanks held early talks with JP Morgan, Apollo Global Management, Brookfield Asset Management, Mizuho, and other financial groups. Still, none of them is yet to commit the funds because they’re rethinking the risks and profits of financing large-scale data centers when the global economy is unstable.
The proposed tariffs on server racks, cooling systems, and computer chips could make Stargate more expensive to complete and harder to profit in its early years by raising the cost of building data centers from 5% to 15%.
Other companies are also building similar infrastructure. Their success could reduce the demand for AI services, making lenders and debt investors more careful with their money as they fear being stuck with underused or empty centers.
SoftBank has about 10% to 20% of equity and expects to raise the rest from mezzanine bonds and senior loans, which increases financial pressure and risk if the demand for AI doesn’t grow as quickly as they expect.
At the same time, pension funds, insurers, and asset managers invited to join the project wait to see whether market conditions will be favorable and if Stargate will be clearer on generating stable and long-term profits amid the many risks involved.
But this hasn’t stopped SoftBank from moving forward with Stargate because it is building a team of 20 to 30 people inside its Vision Fund investment group in preparation for the project’s launch. Managing partner Vikas J. Parekh will guide the project’s early stages and financial efforts with his deep experience in automation and enterprise software.
OpenAI problems and cheaper AI models shake investor trust in Stargate
OpenAI CEO Sam Altman tried to change the organization into a fully for-profit company, which did not sit well with former co-founders, staff members, academics, and Elon Musk, who once helped fund and shape the company.
Sam Altman slowed down the company’s restructuring because the pushback increased when Microsoft, one of OpenAI’s biggest investors, did not publicly support the change.
Investors became nervous about OpenAI’s stability and future role because the disagreements showed problems with leadership. At the same time, the CEO’s change of decision raised uncertainty about how much power OpenAI will have in Stargate and whether its partnership with Microsoft will remain steady.
Competition has also risen after the Chinese company DeepSeek introduced new and cheaper AI models that could make OpenAI’s services less valuable in the future, which will lower the profits investors expect from Stargate’s data centers.
Microsoft has begun cutting back on some of its global data center projects, Amazon changed its data center plan, and Amazon Web Services reported its slowest growth rate in more than a year. These red flags worry investors who fear profits will drop if demand for AI slows down or investors build data centers too quickly.
SoftBank is hopeful as Oracle continues building Stargate’s first data center in Abilene, Texas, while the company explores other locations for future infrastructure.
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