How OpenAI’s Quest for a Compute Empire Is Reshaping the AI Landscape

In just one week, OpenAI achieved three major milestones.

On September 10, Oracle’s stock surged 36% in a single day, the biggest one‑day gain in 32 years, driven by a five‑year, $300 billion cloud‑service contract with OpenAI.

On September 11, Microsoft quietly signed a non‑binding memorandum of understanding that green‑lit OpenAI’s corporate restructuring and marked the end of their exclusive cloud‑service arrangement.

Both events reflect different facets of the same compute‑power battle: without loosening the Microsoft exclusivity, OpenAI could not negotiate the Oracle deal, and without the Microsoft concession, OpenAI could not secure the financing needed for the $300 billion commitment.

Meanwhile, OpenAI’s self‑developed chip timeline has been confirmed: media reports indicate that OpenAI’s chip, co‑developed with Broadcom, will go into production next year for internal use.

In the pre‑ChatGPT era, OpenAI’s rise relied on two major supporters. About ten years ago, Nvidia’s Jensen Huang personally delivered a supercomputer to OpenAI’s headquarters, and Nvidia’s chips powered the training of the ChatGPT models. Microsoft, as the largest financial backer, invested hundreds of billions of dollars early on, providing the capital needed to cover the costly compute expenses.

However, as OpenAI grew, these supports became constraints: Nvidia’s chip costs are high, and Microsoft’s funding and compute resources are no longer sufficient, making OpenAI’s future uncertain.

If the first stage relied on Nvidia and Microsoft as fuel and fire, the second stage finds the fuel too expensive and the fire insufficient.

OpenAI is now building its own “compute empire,” using its own fuel and attracting diverse fire sources.

On September 17, after loosening ties with Microsoft and sealing the Oracle deal, OpenAI announced the “Star Gate” AI infrastructure project in the United States, which will also be established in the United Kingdom, following Google’s and Microsoft’s commitments to build new AI data centers in the UK.

OpenAI’s “compute empire” ambition puts it on par with industry giants.

After a series of negotiations with Microsoft, OpenAI finally secured a path forward, but the empire’s construction still faces many challenges.

01

The non‑binding memorandum signed on September 11 records the most important relationship restructuring in OpenAI’s commercial history.

Although the joint statement contains only three sentences and reveals no details, OpenAI’s accompanying statement hints that the nonprofit entity will hold equity in the new public‑benefit corporation (PBC) created by the deal, with Microsoft playing a significant role.

According to analysis by The Information, Microsoft will acquire about 28 % of OpenAI’s equity after the restructuring, becoming the largest external shareholder. Based on an estimated $500 billion valuation, this stake is worth roughly $1.4 trillion, far exceeding Microsoft’s total historic investment of $140 billion.

OpenAI’s concession comes with conditions.

In exchange, Microsoft’s revenue share from OpenAI will be dramatically reduced.

Under the original agreement, Microsoft is entitled to 20 % of OpenAI’s revenue until 2030. OpenAI expects its revenue from Microsoft to be about 8 % in 2020, slightly below the 20 % target this year.

The difference allows OpenAI to retain over $50 billion in additional revenue before 2030.

This income is crucial for OpenAI, which faces ever‑increasing compute‑cost pressures.

OpenAI states that its nonprofit arm will receive more than $100 billion—about 20 % of the $500 billion valuation it seeks in private markets—making it one of the world’s most financially endowed nonprofit organizations.

The core value of the new agreement for OpenAI lies in obtaining formal permission from Microsoft to transition to a public‑benefit corporation.

This approval resolves a two‑year‑long corporate‑structure dilemma and clears the path for an IPO, making large‑scale financing possible.

Understanding the significance of this agreement requires reviewing the evolution of Microsoft’s relationship with OpenAI.

The seed of this battle was planted two years ago.

In 2019, Microsoft invested $1 billion in OpenAI, becoming its exclusive cloud‑service provider and gaining exclusive Azure access and technology priority.

At that time, OpenAI was a research institute with less than $100 million in annual revenue, and Microsoft’s investment was a lifeline.

After ChatGPT’s launch in 2022, Microsoft quickly followed, increasing its total compute and cash investment to $13 billion in 2023, entering a deep partnership phase.

Microsoft provided massive compute resources, enabling OpenAI’s rapid AI advancements, while OpenAI’s technology was integrated into Microsoft’s cloud products.

Simultaneously, the successful collaboration attracted more AI companies to Microsoft’s compute services, boosting its cloud revenue growth over 100 % in 2022.

However, the honeymoon ended quickly.

Reports indicate that Microsoft CEO Satya Nadella was shocked by the brief removal and reinstatement of OpenAI CEO Sam Altman in November 2023, prompting Microsoft to hedge its bets by reducing reliance on OpenAI and adding other large‑language models to Azure.

02

OpenAI’s battle with Microsoft stems from its grand ambition to build a “compute empire.”

The underlying pressure is simple: compute is scarce.

ChatGPT now serves over 1 billion users, generating subscription revenue exceeding $10 billion, and its stock has risen seventeen‑fold to a $500 billion valuation.

This explosive growth brings massive compute demand and sky‑high compute costs, straining infrastructure.

In March, ChatGPT 4.5 introduced advanced image generation, attracting massive attention.

However, image generation requires extremely high compute, leading to delayed updates and service outages, prompting user complaints.

OpenAI’s CEO repeatedly warned that their GPUs are “crashing” and pleaded on social media for more GPU resources.

03

The biggest question is: where will the money come from?

OpenAI began as a nonprofit research lab funded by donations, possibly for tax advantages.

As commercialization progressed, its nonprofit status faced scrutiny, creating financing challenges.

In November 2023, the nonprofit board abruptly dismissed Altman, nearly causing a collapse; he later returned under pressure, exposing governance issues.

Elon Musk sued Altman in February 2024, alleging deviation from the original nonprofit mission.

After a 2024 restructuring, OpenAI now operates a dual‑layer structure: the nonprofit OpenAI Inc. controls the for‑profit subsidiary OpenAI LP, claiming that profit will support the nonprofit’s mission.

This arrangement has faced criticism from former employees, AI ethicists, and regulators.

Under pressure, OpenAI temporarily abandoned the for‑profit conversion in May 2024, announcing that the nonprofit would retain control while the for‑profit entity becomes a public‑benefit corporation.

The PBC conversion may be the only viable solution.

04

Even if the restructuring succeeds, OpenAI’s path to a compute empire remains fraught with financial gaps, technical uncertainties, and competitive pressures.

OpenAI’s annual revenue of $12.7 billion pales compared to an annual spend of $60 billion on the Oracle contract, creating a massive deficit that requires continuous large‑scale financing.

Market skepticism surrounds the $500 billion valuation, with analysts noting limited fundraising capacity for a nonprofit and Oracle’s heavy reliance on OpenAI.

Technical risk also looms: if AI progress stalls, OpenAI’s massive investments could be wasted.

Competition is intensifying, with Google, Anthropic, Meta, xAI, and others building their own AI compute infrastructure.

xAI built the “Colossus 1” cluster in Memphis with roughly 200 k H100/H200 GPUs, and plans to surpass rivals with “Colossus 2.”

Geopolitical factors add complexity as US‑China AI competition extends to infrastructure.

Overall, control over compute resources is becoming the strategic resource of the AI era, akin to oil in the industrial age, and OpenAI’s attempt to build an independent compute empire reflects both commercial ambition and a bid for future AI dominance.