CNBC Daily Open: Bad timing for OpenAI’s Stargate to come online

Talk about bad timing. OpenAI’s first Stargate development to come online — a data center in Texas that’s stuffed to the brims with Oracle and Nvidia infrastructure — did so just as investors started questioning the sustainability of the artificial intelligence firm’s trajectory.

Shares of Nvidia and Oracle, the major players in OpenAI’s push to establish data centers that are essentially the heart of ChatGPT, fell Tuesday. Their moves were all the starker when compared with their spikes on the previous day, when Nvidia and OpenAI jointly announced their $100 billion partnership.

Some questions that investors appeared to be asking: Where’s all that power needed to keep the data centers running — approximately the output of 17 nuclear plants — going to come from? Is Nvidia’s investment in OpenAI — which essentially gives the company money to buy its chips — uncannily similar to what happened during the 2000s Dotcom bubble?

Adding to those concerns was U.S. Federal Reserve Chair Jerome Powell’s statement that “by many measures, for example, equity prices are fairly highly valued.” Additionally, Powell raised concerns that there could be signs of stagflation — persistent inflation amid a flagging labor market — in the U.S. economy.

That combination of events might make OpenAI CEO Sam Altman feel like the bride getting outshone on her wedding day. Or maybe not. Altman acknowledged that “people are worried” — “but this is what it takes.” Besides, that bride still has many suitors, waving billion-dollar checks at her.

Slowing U.S. employment led to rate cut. Federal Reserve Chair Jerome Powell made those comments on Tuesday, when he warned about the growing “two-sided risks” of inflation and unemployment. He added that stock prices look “fairly highly valued.”

OpenAI opens first Stargate data center. It’s located in Abilene, Texas, and is powered by Oracle Cloud infrastructure and Nvidia chips. OpenAI finance chief Sarah Friar said the company will bring in $13 billion in revenue this year.

Alibaba to invest more in artificial intelligence. The total amount will be more than the 380 billion yuan ($53 billion) over three years previously announced, CEO Eddie Wu said Wednesday. Hong Kong-listed shares of Alibaba jumped to their highest since 2021.

U.S. tech stocks pull back. That caused the S&P 500 to close 0.55% lower Tuesday, after touching an intraday high in the session. Asia-Pacific markets were mixed Wednesday. Hong Kong’s Hang Seng Index rose on the back of Alibaba’s jump.

[PRO] Monumental needs for a ‘monumental’ deal. Nvidia’s $100 billion investment in OpenAI will require the power consumption of 8 million U.S. households, according to a CNBC calculation. Finding that energy could be difficult.