Private Data Centers in the Big Tech Game

Crusoe recently announced a monumental $3.4 billion deal to develop a data center that could eventually become one of the largest in the world. Oracle, a major cloud provider, is leasing the site and renting Nvidia AI chip-equipped servers to OpenAI, according to a report from The Information.

This is extraordinary because it highlights OpenAI’s reliance on a previously lesser-known data center startup, Crusoe, in the high-stakes race for AI infrastructure. But how did this come about?

June 2024

Oracle reports that Oracle, Microsoft, and OpenAI are partnering to extend the Microsoft Azure AI platform to Oracle Cloud Infrastructure (OCI), providing additional capacity for OpenAI.

July 2024

Crusoe Energy shifts focus from cryptocurrency mining to AI data centers, building permanent infrastructure for AI clients.

Later in the month, Crusoe's shares already trade on secondary platform at $32-$38 (660% premium vs last primary round price).

September 2024

Elon Musk announces the completion of Colossus, the largest Nvidia H100 cluster for Grok AI, built in just three months.

Days later, Oracle reveals plans for the new largest AI supercomputer in the cloud in 2025. It looks the facility will host AI workloads for OpenAI. With competitors like Anthropic using Amazon, Google running on its own infrastructure, and Meta poised to launch its own supercluster in November, who else might need a 100000GPU cluster?

October 2024

OpenAI secures $6.6 billion in funding. As part of the raise, OpenAI asked investors not to fund five perceived competitors, including Anthropic, Elon Musk's xAI, and Safe Superintelligence (SSI), as well as Perplexity and Glean.

A week later OpenAI's CFO, Sarah Friar, expresses concerns about Microsoft's inability to provide sufficient computing power, prompting OpenAI to seek alternative data center solutions.

And now Crusoe claims it will provide the infrastructure for a cluster capable of supporting 100,000 GPUs—on par with xAI’s supercomputer. Crusoe reports it signed a long-term lease for the campus with a "Fortune 100 hyperscale tenant"—reportedly Oracle.

Why is this interesting for private tech investors?

Third-Party AI Infrastructure: This deal underscores the demand for third-party infrastructure providers partnering with Microsoft to support OpenAI’s work. Last year, Microsoft signed a deal with CoreWeave, reportedly worth billions.

Private Sector Opportunity: Oracle’s reliance on a private company like Crusoe highlights the urgency of quickly building AI infrastructure, leaving room for private providers to enter the race.

OpenAI-Microsoft Relationship: how long will this relationship remain one-side exclusive? This is interesting especially because Perplexity AI is raising a new funding and we are wondering if OpenAI’s investors will keep away indeed.

Supply Chain Participation: who else will be part of this AI infrastructure supply chain?

More news from AI infrastructure investing

CoreWeave, the AI cloud service provider, has finalized an investment deal with Cisco, potentially valuing the startup at $23 billion. Interestingly, CoreWeave remains liquid on the secondary market, showing how secondary investors are actively following the "big-tech-smart-money" trail.

DataBank, another private data center operator, announced a $2 billion equity raise led by AustralianSuper, further emphasizing the capital flowing into the AI infrastructure space.

Lightmatter, a semiconductor startup, raised $400 million in its Series D funding round at a $4.4 billion valuation, led by T. Rowe Price Associates with participation from Fidelity and GV. Lightmatter’s valuation nearly quadrupled, underscoring investor confidence in AI hardware.

Meanwhile, Amazon and Databricks struck a five-year deal that will see Databricks using Amazon's custom Trainium AI chips, aimed at lowering costs for companies developing AI models. This partnership accelerates Databricks’ AI services while enabling businesses to access faster and more cost-effective solutions, positioning Databricks as a strong competitor to Microsoft and Nvidia in the AI space.

Stripe brought a wave of optimism to venture capitalists

Stripe reports of its potential acquisition of Bridge, a stablecoin infrastructure startup, for $1 billion, according to Forbes. Stripe CEO Patrick Collison previously stated the company's ambition to "build the world's best stablecoin infrastructure."

This deal, valuing the two-and-a-half-year-old Bridge at $1.1 billion—roughly 90 times its revenue, according to The Information—signals a significant bet on the future of stablecoins, a type of cryptocurrency pegged to traditional currencies.

Bridge’s growing influence was highlighted by recent meetings between its executives and Apple to discuss stablecoin technology. Stripe’s acquisition of the company underlines its commitment to blockchain and its strategic move to integrate this technology into its financial ecosystem.

Perplexity's new valuation ambition

As previously noted, Perplexity AI is seeking a valuation of approximately $8 billion in its latest funding round. Perplexity started the year with a roughly S500M valuation. With projected 2024 revenue of $50 million, this would give Perplexity an EV/AAR multiple of an astounding 160.

And finally, some IPO-related news: Toyota-backed autonomous vehicle company Pony AI has joined the list of Chinese firms going public on the U.S. stock market after a multi-year ban from Beijing on offshore capital raising. Techcrunch provides four takeaways from Pony AI’s IPO filing