OpenAI data center pivot underscores Wall Street IPO concerns

When OpenAI CEO Sam Altman took the stage at BlackRock’s U.S. Infrastructure Summit earlier this month, he acknowledged his company is facing a harsh reality: data centers are hard.

“Anything at this scale, it’s just like so much stuff goes wrong,” Altman said, in a fireside chat at the conference in Washington, D.C.

Altman gave an example of a severe weather event at a data center campus in Abilene, Texas, that temporarily “brought things down.” The facility serves as the flagship site of OpenAI, Oracle and SoftBank’s $500 billion Stargate project. Altman said his company has also been navigating supply chain challenges and pressure to meet tight deadlines. 

The stakes for Altman are growing as he aims to turn OpenAI, which was valued at $730 billion in a record fundraising round last month, from a private market darling into an investable asset for a more discerning class of public market fund managers. That’s meant retreating from some hefty spending plans, shelving certain ambitious projects and accepting OpenAI’s role as a purchaser of massive amounts of cloud capacity rather than as a builder of mammoth data centers.

“OpenAI has come to the realization that the market doesn’t necessarily appreciate the reckless approach to growth and spending,” Daniel Newman, CEO of Futurum Group, told CNBC in an interview. “The market wants to see OpenAI’s revenues rolling at a pace in which the spending can be justified. The pivot, in my opinion, has been to try to show a little bit more fiscal responsibility.”

The strategic shift means OpenAI may have to settle for doing less while simultaneously trying to compete with Anthropic, Google and a host of other companies developing AI models, apps and features. OpenAI trains and runs AI models that require enormous amounts of computational resources, including chips, processing power, memory and energy. Altman and other OpenAI executives have for years stressed that compute is a major bottleneck for the company, which has proceeded to raise astronomical sums of cash, including $110 billion earlier this year, with $50 billion coming from Amazon.

In a post on X in November, Altman wrote that OpenAI and other companies “have to rate limit our products and not offer new features and models because we face such a severe compute constraint.” 

Up to that point, the big story for OpenAI last year was the extreme lengths Altman went to secure capacity. The company inked a flurry of multibillion-dollar infrastructure deals with companies including Nvidia, Advanced Micro Devices and Broadcom. Altman said in his November post that OpenAI was looking at commitments of roughly $1.4 trillion over the next eight years.  

The deals rattled public markets, sparked fears about a potential AI bubble and caused many investors to…