Startup News: OpenAI and Microsoft planning $100B project to power AI

OpenAI and its largest investor Microsoft (NASDAQ: MSFT) are reportedly planning to launch a data center that would include a supercomputer to power OpenAI’s artificial intelligence efforts, according to tech news site The Information.

The reporting in The Information, which is based on three people close to OpenAI, said that Microsoft would “likely” be responsible for financing the project, “which would be 100 times more costly than some of today’s biggest data centers.”

Executives with both companies, according to The Information, expect that the U.S.-based supercomputer, known as “Stargate,” will be the largest of a series of installations the two companies are looking to build in the coming six years.

The Information added that Microsoft’s willingness to follow through on the Stargate project depends in part on OpenAI’s ability to improve its AI capabilities. “OpenAI last year failed to deliver a new model it had promised to Microsoft, showing how difficult the AI frontier can be to predict,” The Information reported. “Still, OpenAI CEO Sam Altman has said publicly that the main bottleneck holding up better AI is a lack of sufficient servers to develop it.”

In February, The Wall Street Journal reported that OpenAI CEO Sam Altman is in talks with several investors around the world to raise trillions of dollars to boost global chip-building capacity to power AI initiatives.

Founded in 2015, OpenAI emerged as a prominent generative AI company following the release of the hugely popular ChatGPT chatbot in late 2023. In February 2024, The New York Times reported that the company completed a deal, involving the sale of existing shares in a tender offer, which effectively valued the company at $80 billion.

OpenAI’s Forge Price™ was $173.08 as of April 4, 2024 which is an increase of 15.4% year-to-date.

Hugging Face gets a boost from Cloudflare

Hugging Face is known as a watering hole for AI software developers who use the company’s platform to host AI models, train them, and even browse and use models created by other people. In early April, Hugging Face and the users of its “hub” got a boost from Cloudflare (NYSE: NET), which bills itself as the leading cloud connectivity company.

Cloudflare announced in a press release that developers using New York City-based Hugging Face can now “deploy AI applications on Cloudflare’s global network in one simple click directly from Hugging Face.” Cloudflare added that this partnership will allow users of the Hugging Face platform to easily deploy AI globally, without managing infrastructure or paying for unused compute capacity. According to Hugging Face, AI software developers will be able to build robust generative AI applications “without managing GPU infrastructure and servers and at a very low operating cost.”

Hugging Face’s last-known valuation, as listed on Forge Global, is $4.57 billion, which is based on a funding round in August 2023.

Hugging Face’s Forge Price™ was $25.25 as of April 4, 2024 which implies a valuation of $4.57 billion.

About the Author

John Kimelman is a veteran journalist who has worked at Barron’s and CNBC covering such topics as investing and commercial banking. Mr. Kimelman has received compensation from Forge Global, Inc. for authoring this article. Read more from John.

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