Public announcement! Altman wants to establish a rocket company to compete with Musk's SpaceX

OpenAI CEO Sam Altman has explored the acquisition or collaboration to establish a rocket company, directly competing with Elon Musk's SpaceX.

On Thursday, The Wall Street Journal cited sources familiar with the matter, stating that Altman reached out to a rocket manufacturer, Stoke Space, last summer to discuss accelerating progress in the fall. Proposals included OpenAI making a series of equity investments in the company, ultimately gaining a controlling stake, with total investments reaching billions of dollars. However, sources close to OpenAI indicated that the negotiations are no longer active.

For a long time, Altman has expressed interest in the possibility of building data centers in space, believing that the immense demand for computing resources from artificial intelligence systems may eventually require so much power that space becomes a better option. This move would further escalate his competition with Musk in the fields of rocket launches and AI.

This comes at a time when OpenAI is facing market headwinds. The company has signed computing deals worth hundreds of billions of dollars but has not publicly explained how it will fund these projects, while ChatGPT is losing market share.

Details of Rocket Company Negotiations Emerge

According to The Wall Street Journal, Altman contacted Stoke Space last summer. The company was founded by former employees of Jeff Bezos's Blue Origin and is developing fully reusable rockets, which is also the goal SpaceX is striving to achieve.

One of the negotiation proposals was for OpenAI to make a series of equity investments in Stoke, ultimately gaining a controlling stake. This investment could total billions of dollars over time. Sources indicated that discussions heated up in the fall, but those close to OpenAI stated that the negotiations are currently no longer active.

Reaching a deal with Stoke would allow Altman to participate in the development of the company's rocket, Nova. However, creating a new rocket is fraught with technical challenges and regulatory issues, typically taking a decade, making it difficult to start a new company from scratch. Currently, several launch companies, including Blue Origin, Rocket Lab, and Stoke, are trying to challenge SpaceX's dominance.

Grand Vision for Space Data Centers

Altman has publicly discussed the possibility of establishing a rocket company and developing data centers in space multiple times. He believes that the computing resources required to power artificial intelligence systems are immense and may eventually require so much electricity that the environmental impact would make space a better option. Proponents of orbital data centers argue that this would allow businesses to harness solar energy for their power needs.

“I do speculate that over time, many places in the world will be filled with data centers,” Altman recently said on a podcast with Theo Von. “Maybe we’ll build a giant Dyson sphere around the solar system and say, 'Hey, putting these things on Earth doesn’t actually make sense.'”This concept has yet to be confirmed, but Google, a subsidiary of Alphabet, and satellite operator Planet Labs have reached an agreement to launch two prototype satellites equipped with Google AI chips in 2027. Tech CEOs, including Bezos, Musk, and Google's Sundar Pichai, have praised the potential of building AI computing clusters in space.

OpenAI Faces Payment Pressure

These discussions about potential rocket investments began to take shape as market enthusiasm for AI peaked. Altman announced a series of chip and data center deals in September and October of last year, with partners including Oracle, Nvidia, and Advanced Micro Devices.

Investors initially reacted positively to these announcements, with Oracle and Nvidia's stock prices rising sharply in the weeks following the announcements. However, the market soon turned pessimistic about expansionist AI ambitions, with Oracle's stock price dropping about 19% in the past month and Nvidia down about 13%. Nvidia's CFO stated this week that the company's $100 billion deal with OpenAI has not yet been finalized.

In just the past few months, OpenAI has signed nearly $600 billion in new computing commitments, raising questions about how it will finance these development projects. The startup is expected to achieve $13 billion in revenue this year while facing pressure from Anthropic, which is rapidly growing its sales among programmers and enterprise clients.

On Monday, OpenAI announced it was entering "red alert" status to improve ChatGPT, as the product began to lose market share to Google's Gemini chatbot. As a result, OpenAI is delaying the launch of other products, including its advertising business, and encouraging employees to temporarily shift roles to focus on the chatbot.

Engaging in "Full Competition" with Musk

The proposed collaboration with Stoke will make Altman's competition with Musk more direct. SpaceX dominates the rocket launch sector, and Musk also operates the competing AI startup xAI. Altman recently founded the brain-computer interface startup Merge Labs, competing with Musk's Neuralink, and OpenAI is also building a social network that could compete with X.

Altman is a seasoned venture capitalist who previously managed the startup incubator Y Combinator, which invested in Stoke. According to previous reports from The Wall Street Journal, he oversees a large and opaque portfolio involving over 400 companies. His personal investments have become less frequent, but he is not shy about leveraging OpenAI's balance sheet to fund ambitious projects. For example, earlier this year, he committed OpenAI to invest $18 billion in a new data center company called Stargate alongside SoftBankAltman asked in a podcast with his brother last June, "Should I start a rocket company? I hope the energy consumed by humanity will far exceed the energy we can produce on Earth."

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