OpenAI, Nvidia, SB Energy finalize Ohio AI infrastructure deal

OpenAI said it will lease a 8 gigawatt data center project in Ohio with SB Energy and Nvidia providing a backstop.

The announcement is a follow-up to a previous release about the plans. The US Department of Energy is also involved with the project at IT at the PORTS-Pike Technology Campus in Pike County, Ohio.

Key points:

• SB Energy will build, own and operate the data center under a 20-year lead to OpenAI.
• OpenAI will use the site to exclusively run Nvidia infrastructure.
• OpenAI will only pay as completed capacity is available from revenue, cash flow and capital raised.
• Nvidia will invest $1.5 billion in SB Energy and provide "credit support for the land, power, and shell buildout associated with the initial 4.25 IT-GW." Translation: That's Nvidia's backstop, which is capped at $105 billion.
• Nvidia has an option to take the remaining 3.75 GW at the facility.
• Softbank and OpenAI will invest $1 billion in SB Energy.
• The effort in Ohio falls under the US Stargate projects.

According to OpenAI, the build-out in Ohio will take six years and lead to 35,000 construction jobs through 2032 and 2,500 long-term operating jobs. OpenAI said it will invest $40 million in community grants to match the sum SB Energy, a Softbank unit, promised.

With all of these infrastructure announcements, the big questions revolve around duration, which are usually years or decades. And the ability of OpenAI to meet its promises with profits and growth. OpenAI is reportedly on deck for an IPO as early as this year. Anthropic is planned for the Fall.

OpenAI said SB Energy will pay for energy upgrades and the project will pay its own energy bills and recirculate water. These moves are becoming standard since AI data center are facing pushback from local communities.

In an SEC filing, Nvidia outlined the backstop it is providing.

"NVIDIA’s aggregate payment obligation is cumulatively capped at $105 billion for its initial commitment under the Agreements. NVIDIA’s payment obligations are subject to specified conditions, including among other things, that the Lessor has satisfied applicable ready-for-service conditions under the lease for the relevant premises, expected beginning in 2028.

Pursuant to the Agreements, OpenAI is the tenant; however, in the event of (i) OpenAI’s insolvency resulting in a default under a lease, or (ii) OpenAI’s failure to make payments under a lease (each a “Trigger Event”), NVIDIA will pay an amount generally equal to any shortfall between the guaranteed minimum value of a lease (as set forth in the Agreements) and amounts recovered through a replacement lease or sale.

Upon a Trigger Event, NVIDIA may elect to (i) assume the applicable lease, (ii) require the Lessor to seek to relet the applicable premises, (iii) initiate a sale process, (iv) allow the applicable lease to be terminated, or (v) defer the exercise of these remedies for up to one year while paying specified project agreement costs. NVIDIA’s obligations under an Agreement will terminate upon the earliest to occur of (i) the 20th anniversary of the commencement of the applicable lease, (ii) the termination of the applicable lease by OpenAI in accordance with its terms, (iii) OpenAI achieving a satisfactory credit rating, and (iv) other customary termination events. OpenAI has agreed to reimburse and indemnify NVIDIA for any and all amounts actually paid by NVIDIA to the Lessor under the Agreements."

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