Talk about timing. OpenAI's first Stargate data center—a massive facility in Abilene, Texas, powered by Oracle Cloud infrastructure and Nvidia GPUs—came online this week just as investors began to question whether the artificial intelligence boom is running too hot.
The debut, meant to showcase OpenAI’s next phase of growth, coincided with a pullback in U.S. tech stocks.
Investor Concerns: Power, Parallels, and Valuations
The selloff wasn’t just about profit-taking. Investors are asking tough questions:
- Energy demand: Running hyperscale AI data centers requires staggering amounts of electricity—by some estimates, the equivalent of 17 nuclear power plants. Where that power will come from, and at what cost, remains unclear.
- Dotcom already seen: Nvidia’s investment in OpenAI, which effectively gives the AI firm money to buy more Nvidia chips, has drawn comparisons to the circular financing schemes of the 2000s dotcom bubble.
- Market froth: Federal Reserve Chair Jerome Powell added fuel to the skepticism, warning Tuesday that "by many measures, equity prices are fairly highly valued." He also flagged the risk of stagflation—persistent inflation coupled with a weakening labor market.
That combination of stretched valuations, macroeconomic uncertainty, and sky-high expectations for AI left some investors uneasy.
Altman's Response: "This Is What It Takes"
OpenAI CEO Sam Altman brushed off the timing concerns, acknowledging that "people are worried" but insisting that massive infrastructure spending is necessary to keep pace with AI demand. "This is what it takes," Altman said, likening the moment to a bride overshadowed on her wedding day—though one still surrounded by eager suitors waving billion-dollar checks.
OpenAI’s finance chief Sarah Friar added that the company expects to generate $13 billion in revenue this year, underscoring the scale of its ambitions.
Broader Market Moves
The Stargate launch wasn’t the only headline moving markets:
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U.S. tech stocks pulled back, dragging the S&P 500 down 0.55% after touching an intraday high.
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Alibaba surged in Hong Kong trading after CEO Eddie Wu pledged to increase AI investment beyond the previously announced 380 billion yuan ($53 billion) over three years. Shares hit their highest level since 2021.
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Japanese equities extended record highs, buoyed by foreign inflows and governance reforms. Analysts say Japan may finally be exiting its "lost decades" of deflation, with real wages and household consumption showing tentative recovery and inflation stabilizing near the Bank of Japan’s 2% target.
The Bottom Line
OpenAI's Stargate debut highlights both the promise and the pitfalls of the AI revolution. On one hand, the company is scaling at breakneck speed, backed by deep-pocketed partners like Nvidia and Oracle. On the other, the sheer cost, energy demands, and market froth surrounding AI raise uncomfortable echoes of past bubbles.
For investors, the message is clear: the AI story is far from over, but the easy gains may be behind us. With Powell warning about lofty valuations and stagflation risks, and with global markets sending mixed signals, the road ahead for OpenAI—and for AI stocks more broadly—may be bumpier than the hype suggests.