OpenAI is on the verge of landing a $500 billion data center with the support of Nvidia

OpenAI is close to leasing a $500 billion data center in southern Ohio that could be among the biggest of the artificial intelligence boom, according to three people familiar with the project.

OpenAI is in separate talks with chip giant Nvidia to finance the $250 billion project, said the three people, who spoke on condition of anonymity because they were not authorized to discuss the matter.

The U.S. government, which is helping provide electricity for the project, is still in talks with other potential tenants, and the deal won’t be final until Commerce Secretary Howard Lutnick approves it, one of the people said.

But Japanese conglomerate SoftBank, an OpenAI investor leading data center development, and government officials are leaning toward OpenAI as a major tenant as Nvidia has added financial muscle to the company’s AI proposal, three of the people said.

Microsoft, Google and possibly other companies have also submitted bids to use the data center, the people said. The center, partially funded through a trade deal with Japan, will be supported by 10 gigawatts of electricity, enough to power millions of homes.

The funding for the Ohio project is indicative of the elaborate deals that have helped fuel the artificial intelligence boom over the past few years. Thanks to unusual and creative deals with chipmakers, cloud computing companies and governments around the world, startups like OpenAI and Anthropic are harnessing vast amounts of computing power they couldn’t afford on their own.

Many of these trades can be described as circular. A start-up receives billions of dollars from giant tech companies before sending those billions back to the same companies to pay for computing power and other services.

Last week, Anthropic announced such a deal with AMD, one of Nvidia’s main rivals. AMD agreed to invest $5 billion in Anthropic, while Anthropic agreed to buy tens of billions of dollars worth of hardware from the chipmaker. OpenAI has entered into similar agreements with AMD, Nvidia and others.

Nvidia would allow OpenAI and its partners to get better terms for the billions of dollars in debt they must raise to help finance the project. Nvidia would agree to cover both OpenAI’s lease payments and its debts if the startup was unable to pay itself.

Nvidia, with a market valuation of nearly $5 trillion, is one of the few companies in the world with the financial resources to secure a deal of this size. It can help smaller companies get large amounts of money at reasonable interest rates.

That makes the trade less risky, said Jeremy Kress, an associate professor of business law at the University of Michigan who specializes in financial stability and systemic risk in the economy.

“It’s nice to have insurance,” he said. “You want to see stable money that can absorb losses.”

The Wall Street Journal reported on it earlier conversations between OpenAI and Nvidia.

From 2019 to 2023, Microsoft has pumped more than $13 billion into OpenAI. OpenAI then funneled most of those billions back into Microsoft, buying the cloud computing power needed to support the development of new AI technologies. Anthropic has made similar deals with Google and Amazon. And Google has provided chips and financial security for new data centers built by Anthropic and other partners.

(The New York Times has sued OpenAI and Microsoft, alleging copyright infringement of news content related to AI systems. Both companies have denied the suit’s claims.)

OpenAI’s latest effort is even bigger and more sophisticated. Nvidia, which previously invested $30 billion in OpenAI, is also considering financing a $350 billion purchase of its chips for a data center in Ohio, a person familiar with the talks said.

The US government provides electricity through a partnership with Japan. The Japanese government has agreed to help finance the project as part of an agreement on investment in American projects in exchange for lower tariffs. Mr. Lutnick will need approval from the Japanese government to complete the transaction.

SoftBank, a longtime OpenAI investor and partner, is building a data center out of a decommissioned Cold War-era uranium enrichment plant on federal land in Piketon, about 50 miles south of Columbus. The project is still in the early stages and it is not yet clear when the data center will be completed. Completion of the first stage of construction is planned for 2028.

Financial experts have long warned that such deals pose a risk to the economy because companies take on huge amounts of debt to finance new data centers — and because of the circular nature of many deals.

“Five hundred billion dollars is a very large project, even considering the current level of spending across the industry,” said Gil Luria, head of technology research at investment firm DA Davidson. “Is this investment worthwhile? Will it generate adequate returns? Is it sustainable? This is the right conversation.”

Dr. Kress said that even if Nvidia stopped the deal, it would still be a risk. If OpenAI struggles to pay its debts, it could mean the entire AI industry, including Nvidia, is in financial trouble.

“It’s not really out of equity to stop the project,” he said. “There is a very high correlation between Nvidia’s business and the success of this project.”

Mr. Luria said some investors are already starting to see significant returns from data center deals. This includes tech giants like Google as well as investment banks like Blackstone.

Google said last week that its revenue in the three months that ended in June rose 24 percent from a year earlier, helped by the company’s investments in artificial intelligence-related companies such as SpaceX and Anthropic. Earnings associated with these investments were valued at approximately $99 billion and contributed $77 billion to the company’s total earnings.

When Blackstone reported quarterly earnings last week, Stephen Schwarzman, the company’s chief executive, said the “most significant driver” of its results was investment in AI, specifically referring to data centers, power and energy, as well as AI companies.

“We are at the beginning of what I believe will be the most consequential transformation in the industry and markets in a generation,” Mr. Schwarzman said during the firm’s investor call.