Oracle, OpenAI consider Michigan site for data center as Stargate deal expands

Open AI has agreed to rent a massive amount of computing power from Oracle Corp. data centers as part of its Stargate initiative, underscoring the intense requirements for cutting-edge artificial intelligence products.

The AI company will rent additional capacity from Oracle totaling about 4.5 gigawatts of data center power in the U.S., according to people familiar with the work who asked not to be named discussing private information.

That is an unprecedented sum of energy that could power millions of American homes. A gigawatt is akin to the capacity from one nuclear reactor and can provide electricity to roughly 750,000 houses.

Earlier this week, Oracle announced that it had signed a single cloud deal worth $30 billion in annual revenue beginning in fiscal 2028 without naming the customer. This Stargate agreement makes up at least part of that disclosed contract, according to one of the people.

Stargate — OpenAI’s project with partners including Oracle and SoftBank Group Corp. to invest $500 billion in AI infrastructure — was first announced in January at the White House. So far, Oracle has developed a massive data center in Abilene, Texas, for OpenAI alongside development partner Crusoe. 

To meet the additional demand from OpenAI, Oracle will develop multiple data centers across the U.S. with partners, the people said.

Sites in states including Michigan, Texas, Wisconsin and Wyoming are under consideration, in addition to expanding the Abilene site from a current power capacity of 1.2 gigawatts to about 2 gigawatts, they said. 

OpenAI is also considering sites in New Mexico, Georgia, Ohio and Pennsylvania, one of the people said.

These new projects will be part of Stargate, and details of the plans may still change, according to a person familiar with the plans. OpenAI and Crusoe declined to comment on the plans. Oracle didn’t return a request for comment.

In Michigan, demand is expected to surge for new mega data centers. 

In late December and mid-January, Gov. Gretchen Whitmer signed bipartisan bills to award tax breaks to businesses that spend at least $250 million to build or expand data centers. Such data centers will be eligible to pay no sales or use taxes on equipment.

The legislation was a bid to lure huge data centers that legislators said would not come without tax incentives dangled in other states.

“As soon as they did that, it opened up the floodgates. We’ve got lots of people that are very interested. It could be very significant for us,” DTE Energy Co. Jerry Norcia told Crain’s in April. 

DTE is studying an expansion of its Fermi 2 nuclear plant to increase its capacity by 15% to help power new data centers. 

Oracle shares climbed following the news and closed up 5% to $229.98, a record high. The stock has jumped 38% this year, fueled by investor enthusiasm for its cloud business.

Oracle, known for its database software, has gained traction in the market for renting out computing power and storage over the internet, in part by targeting clients focused on AI work. This has led to a jump in revenue and expenses. The $30 billion deal is more than the current size of its entire cloud infrastructure business.

Credit ratings firm S&P wrote Wednesday that Oracle’s cloud infrastructure building spree was straining cash flow and that the current spending pace is higher than anticipated. Still, it viewed Oracle’s cloud strategy favorably over the long term.

Open AI said in May it was helping develop a Stargate project in the United Arab Emirates with Oracle, Crusoe, AI chipmaker Nvidia Corp, Cisco Systems Inc. and G42, an AI company backed by the country’s sovereign wealth fund.

— Crain’s Detroit Business staff contributed to this report.