4 Reasons to Be Skeptical About OpenAI’s $500B Stargate Project
4 Reasons to Be Skeptical About OpenAI’s $500B Stargate Project
A sober look at one of the world’s newest and biggest infrastructure projects.
Robert Bryce
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Publication Note: The Fire Time Magazine appreciates the opportunity to republish this article, which was originally released on January 24, 2025. It is reprinted with permission from Robert Bryce. Be sure to subscribe to his Substack. Further use, duplication, or distribution is prohibited without the author’s written permission.
The numbers are nothing short of gobsmacking. On Tuesday, in a splashy announcement at the White House, OpenAI CEO Sam Altman revealed a new company called The Stargate Project that intends to “invest $500 billion over the next four years building new AI infrastructure” in the U.S. The new company will “begin deploying $100 billion immediately.”
The numbers are so big that it’s easy to lose context. How much is $500 billion? It’s roughly equal to the GDP of entire countries, including—take your pick—Ireland ($529 billion), Israel ($522 billion), and the United Arab Emirates ($507 billion).
With the announcement, Stargate became one of the world’s most expensive infrastructure projects. Last month, China announced it would build a massive hydropower project on the Yarlung Tsangpo River in Tibet at an estimated cost of $136 billion. The price tag for California’s beleaguered high-speed train to nowhere is now $128 billion. Of course, those projects are dwarfed by Neom, the city-in-the-desert project now underway in Saudi Arabia, which is expected to cost $1.5 trillion.
Elon Musk immediately trashed the Stargate deal. Musk, who’s in a legal spat with OpenAI and Altman, claimed that the initial equity funders in the deal (OpenAI, SoftBank, Oracle, and MGX, a tech fund based in the United Arab Emirates) “don’t actually have the money.”
Musk also claimed that SoftBank had secured less than $10 billion for the project. On Wednesday, the ever-charming Musk (net worth: $426 billion) upped the ante by calling Stargate a “fake” and Altman a “swindler.”
Arm, NVIDIA, Oracle, Microsoft, and OpenAI are the “initial technology partners” in Stargate. Asked about the funding for the deal on CNBC, Microsoft CEO Satya Nadella replied, “All I know is, I’m good for my $80 billion.” Such is the staggering power and wealth of Big Tech that its bosses can casually affirm that they are ready and willing to spend such massive amounts of money on AI.
In an announcement posted on X, OpenAI claimed the Stargate Project will “create hundreds of thousands of American jobs, and generate massive economic benefit for the entire world.” It also said it would support the “re-industrialization of the United States” and “provide a strategic capability to protect the national security of America and its allies.”
Those are mighty big claims. Spending $500 billion on an infrastructure project of any kind—and doing so in just four years—is, um, ambitious. Add in the never-ending hype around artificial intelligence, and it appears we may be in the midst of what a former Fed chairman dubbed “irrational exuberance.”
Here’s a sober look at the Stargate Project, with three charts.
Rumors about the Stargate Project began circulating last fall. Several news outlets published articles about OpenAI’s plans for a massive project that would “suck up as much power as major American cities.” One analyst explained that OpenAI was planning to build data center complexes costing $100 billion with “power requirements of five gigawatts each.” But, the analyst continued, “experts are skeptical that anyone is in a position to meet those kinds of energy demands.”
1. Stargate Will Struggle to Get All the Electricity and Natural Gas It Needs
Again, the raw numbers are gobsmacking. The Stargate Project will reportedly consist of five campuses. Thus, it will need at least 25 GW of firm generation capacity and have it online in just four years. That’s a lot of juice in a short amount of time. On Tuesday, Mark Nelson, managing director at Radiant Energy Group, posted an excellent analysis on LinkedIn. “Each center will want at least 6 GW of firm capacity available, minimum, at all times,” he explained. That extra capacity will be needed to ensure maximum uptime. Nelson went on to explain that nearly all of that generation capacity will have to be supplied by gas-fired power plants. He estimated that the gas consumption for each campus will be about 0.7 billion cubic feet per day.
Nelson’s estimate may be too low. According to the EIA, producing one kilowatt-hour of electricity requires burning 7.42 cubic feet of natural gas. Thus, each 5 GW campus will likely need about 890 million cubic feet per day. Providing 25 GW of gas-fired capacity will require about 4.4 Bcf/d. How much is that?
As seen above, if Stargate’s power needs are met with natural gas, it will burn twice as much gas as is now consumed by California and nearly as much as Texas uses.
While the upstream sector in the U.S. could produce another 4.4 Bcf/d of gas and do so quickly, there may not be enough pipeline capacity to move that fuel to the Stargate campuses. For instance, gas producers in the Marcellus Shale are constrained in their ability to expand production because they don’t have enough pipeline capacity. Permitting new pipelines may be easier under the new Trump regime, but building those projects will take years. In addition, new pipelines will face lawfare from the usual suspects at Sierra Club (annual revenue: $173 million) and Earthjustice (annual revenue: $126 million), the San Francisco-based dark money outfit that employs 200 lawyers. On its website, Earthjustice says it aims to “Put pipelines in the past.”
In addition to the question of adequate pipeline infrastructure, a huge amount of gas-fired capacity is already under construction. As I noted a few weeks ago, and as seen above, the data centers now being built will need about 7,500 megawatts of power. That’s roughly the same amount of gas-fired generation now under construction. Another 11,700 megawatts of data center capacity is in the planning process. Stargate will need another 25,000 megawatts (25 GW) of capacity on top of the projects already in the queue.
In addition, gas consumers will soon be confronted with a surge in LNG export capacity. North America now has about 11 Bcf/d of LNG liquefaction capacity. According to the EIA, that number is expected to more than double by 2028 to about 24 Bcf/d. Thus, Stargate will be competing with LNG exports for natural gas.
In short, Stargate will have to compete for electricity and gas with numerous other entities, and it’s not clear that there will be enough energy to go around.
2. Supply Chain Problems Will Cause Delays
As I have previously reported, the entire electric sector is being hampered by shortages of critical components, including transformers, breakers, and switchgear. A report published last October by consulting firm WoodMackenzie noted that wait times for some transformers are now three years. Wait times for large power transformers can be four or even five years. In addition, firms like GE Vernova are seeing considerable increases in order backlogs for key electric components, including gas-fired turbines.
In October, in “An Inflation Hurricane Is Shorting The Electric Grid,” I quoted an executive at a large manufacturing firm. He told me that his firm, which manufactures large gas turbines (170 megawatts and above) known as frame, or F-class machines, had a waitlist of four years. On Wednesday, I talked to a top executive at a large engineering procurement and construction (EPC) firm. He told me those wait times have not changed. He also said, “The tech giants have a ton of money. They think they can throw a ton of money at this, and they’ll get it done quicker. They won’t. It’s not about pricing, it’s about availability.”
3. Land Use Conflicts Are Inevitable
The first Stargate campus is being built in Abilene, Texas. That’s likely a good location because the region is sparsely populated. It is also close to the Permian Basin, which is loaded with cheap natural gas. However, finding other places that have the right mix of available land, gas pipelines, and high-voltage transmission capacity will be increasingly difficult.
Over the past 15 years, I have written extensively about land use conflicts related to wind and solar projects. The Renewable Rejection Database shows that those conflicts are raging all across rural America.
Now we are seeing land-use conflicts over data centers. On January 7, the planning commission in Pittsylvania County, Virginia, voted to deny permission for a $8.8 billion data center project that was to include as much as 3,500 megawatts of gas-fired generation capacity. According to one news report, “Residents in the area of the proposed complex have pushed back against the project, partly due to concerns about losing farmland. An application filed for the project shows that acreage would be adjacent to more than 100 property owners.”
Last March, the board of supervisors in Loudoun County, Virginia, rejected plans for a large data center and required the developer to reduce the size of the project. It was the first time a data center has been denied by Loudoun County. At a hearing on the data center, more than 50 people spoke against the project. Local residents “cited concerns like energy usage environmental impacts, aesthetics, and the significant growth of data centers over the last few decades.” The rejection was due, in part, to “potential constraints on the electric grid.” Last July, planners in Culpepper County, Virginia, denied an application for a data center in Brandy Station.
Siting a large-scale energy project is getting harder and harder. The land-use conflicts over data centers in Virginia, which has been a hotspot in the backlash against Big Solar, indicate more clashes are inevitable.
4. Skilled Labor Shortages Will Hamper the Buildout
Over the past two years, I have spoken to dozens of groups across the country, including electric coops, infrastructure firms, and construction companies. The most common refrain I hear in my travels is that employers of all types—from restaurants to drilling contractors—are having difficulty getting and keeping workers. At an event in Virginia Beach last summer, an executive who was working on data centers said his company doesn’t need any more engineers. Instead, it needs electricians, pipefitters, and welders. On Wednesday, my friend at the EPC firm told me, “I’m getting requests regularly for data centers, and I can’t even bid on them because we don’t have the labor.” He continued, saying that the demand for skilled labor has become so intense that some of his clients are agreeing to no-bid contracts on some projects. My friend, who has been in the EPC sector for over 30 years, said, “I’ve never seen it like this.”
When I asked him about the possibility that Stargate will be able to build 25 GW of new data centers and do it in just four years, he replied, “If you ask me, it’s bullshit.”
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Robert Bryce
Robert Bryce is a Texas-based author, journalist, podcaster, film producer, and public speaker. Over the past three decades, his articles have appeared in numerous publications including the Wall Street Journal, New York Times, National Review, Field & Stream, and Austin Chronicle. He has given nearly 400 invited or keynote lectures to dozens of groups including the Marine Corps War College, Sydney Institute, Jadavpur University, Northwestern University, and a wide variety of professional associations and corporations. He has also appeared on dozens of TV and radio shows, including NPR, BBC, MSNBC, Fox, Al Jazeera, CNN, and PBS.
