(Bloomberg) -- Elon Musk openly questioned whether companies that joined President Donald Trump’s announcement promising hundreds of billions of dollars in artificial intelligence infrastructure could follow through on their promises, exposing an early internal rift within the White House.
“They don’t actually have the money,” Musk wrote on his social media platform X, hours after the announcement. “SoftBank has well under $10B secured. I have that on good authority.”
Trump was joined by SoftBank Group Corp.’s Masayoshi Son, OpenAI’s Sam Altman and Oracle Corp.’s Larry Ellison at the White House to announce the venture, dubbed Stargate, which they said would deploy $100 billion immediately with the goal of eventually spending $500 billion for the construction of data centers and physical campuses.
“This is to me a very big thing,” Trump said. “I think it’s going to be something that’s very special.”
Altman took to X to dispute Musk’s characterization on Wednesday, calling it wrong and suggesting Musk was upset because the pact could rival the billionaire’s own AI efforts.
The public spat underscored some of the tensions that could dominate Trump’s second term in office and echo issues he faced during his last stint at the White House.
Trump’s penchant for portraying himself as a dealmaker resulted in him repeatedly touting private-sector promises to spend on the US that never actually materialized, or represented preexisting commitments that executives repackaged to curry favor with the president. Some of those promises, like aborted plans for a massive Foxconn manufacturing campus in Wisconsin that Trump dubbed the “Eighth Wonder of the World,” became fodder for Democrats on the campaign trail.
The Stargate announcement prompted immediate skepticism over whether it would come to fruition, or represented new spending by the companies.
According to the Information, Altman has told colleagues SoftBank and OpenAI plan to commit $19 billion each to Stargate for a corresponding 40% stake. They may tap capital markets in future, the tech outlet reported. Oracle and Abu Dhabi-backed MGX would contribute about $7 billion apiece, the outlet cited the OpenAI chief as saying.
Apart from financing, there’re questions also about whether Stargate actually amounts to a dramatic increase from previously devised plans.
Son had already announced plans for a $100 billion US investment in AI during an event with Trump in December at the president’s Mar-a-Lago estate, and Stargate is expected to draw from that pot. SoftBank was also met with immediate questions over where the company would get the capital to fund its initiative.
During Trump’s last term, Son was raising his $100 billion Vision Fund with money from outside investors and poured the cash into startups such as WeWork, Uber Technologies Inc. and DoorDash Inc.
SoftBank doesn’t have the cash on hand to deliver on Son’s pledge this time. The company had 3.8 trillion yen ($25 billion) in cash and equivalents on its balance sheet at the end of September. Still, the company’s finances have recovered with the initial public offering of chip design firm Arm Holdings Plc. SoftBank still owns about 90% of Arm, which now has a market capitalization of about $160 billion.
Bloomberg previously reported that SoftBank might tap hyperscalers in a project-financing scheme and leverage tens of billions of dollars into hundreds of billions of dollars. But the effort could lead to calls for higher yields on future SoftBank bond issues.
Son has vowed to increase his investments in artificial intelligence, which he has described as a technology that will change virtually every business. SoftBank invested $500 million in OpenAI in October and is aiming to increase that investment by acquiring up to $1.5 billion in the startup’s stock through a tender offer for existing shareholders.
Musk’s Influence
Musk’s role in the administration running the newly minted Department of Government Efficiency, a cost-savings effort, has prompted questions about conflicts of interest, self-dealing, and his ability to co-exist with Trump.
Musk raised billions of dollars last year for xAI, a startup that seeks to compete with OpenAI. Democrats and government watchdogs have expressed concern that the billionaire could seek to roll back regulations on and investigations into Tesla’s driver-assistance features, and head off investigations into labor practices at his companies.
The Tesla Inc. chief executive’s choice of words in his post questioning how much money SoftBank had secured were reminiscent of his run-in with the US Securities and Exchange Commission in 2018. The agency accused Musk of committing securities fraud after he tweeted in August of that year that he had the “funding secured” to take the carmaker private. He later reached a settlement with the SEC that required him to pay a $20 million penalty and relinquish his role as Tesla chairman.
Musk’s firms have won multibillion-dollar government contracts, and allies have suggested that the incoming administration could seek to award more subsidies and contracts to SpaceX and its Starlink service. Trump also suggested as recently as Tuesday that he would be open to Musk purchasing TikTok, a social video app that rivals his own X platform.
The billionaire was an enthusiastic financial backer of Trump’s reelection effort, but his off-the-cuff commentary on social media seemed destined to create headaches for the White House.
White House Press Secretary Karoline Leavitt said Stargate would create “a minimum” of 100,000 new jobs when asked about Musk’s comments on Fox News.
“The American people should take President Trump’s and those CEOs’ word for it,” she said. “These investments are coming to our great country, and American jobs are coming along with them.”
--With assistance from Lynn Doan and Craig Trudell.
(Updates with reported details on ownership from the ninth paragraph.)
