UK hits back at OpenAI after Stargate project shelved

LONDON — U.K. AI Minister Kanishka Narayan has cast doubt on OpenAI’s stated reason for pausing a major infrastructure project, instead suggesting the company’s finances could be behind the decision.

In a major blow to the U.K.’s AI ambitions, OpenAI last week said it is pausing Stargate UK — a British offshoot of the AI giant’s international infrastructure scheme which encompasses an AI Growth Zone in the North East of England — citing regulation and high energy costs as obstacles.

Speaking on an episode of The Rest is Money podcast, Narayan said there had been “no change to energy pricing, and there has been no change to the regulatory environment” since OpenAI announced Stargate UK in September.

“What has changed is, as is well publicized, OpenAI’s internal financing context has become more challenging and they have made similar calls in the United States with their program there as well,” he said.

“So companies get in trouble, companies have challenges and financing commitments they’ve made,” he said.

OpenAI declined to comment. Two weeks ago the company raised $122 billion, giving it a valuation of $852 billion. The FT recently reported that some investors have expressed misgivings about the company’s decisions as it seeks to stave off competition, although OpenAI denied that investors are unsupportive of its strategy.

Chi Onwurah, a Labour MP and chair of the U.K. parliament’s Science, Innovation and Technology Committee, last week said OpenAI’s decision should be viewed in light of the “wider AI picture globally.”

“There are certainly some problems in the OpenAI business model,” she told BBC Radio 4.

The government needs to address high energy costs, but “our energy costs, which are higher, aren’t more higher than they were back in September when this announcement was made,” she added.

OpenAI’s criticisms have been echoed by other technology and data center firms. Hugh Milward, Microsoft’s U.K. vice president of external affairs, told MPs on Tuesday that energy costs, grid delays and the government’s decision last month to abandon a proposed overhaul of copyright rules have all impacted the company’s investment in U.K. AI infrastructure.

Narayan said that while the U.K. should not aspire to compete with countries like the U.S. on large-scale data centers, it is “critical for us to have core parts of compute in this country.”

The government is determined to increase investment in compute in the U.K. and is taking steps to reduce grid connection delays and energy costs for data centers inside government-designated AI Growth Zones.

In a bid to support domestic AI firms to scale and stay in the U.K. ministers will also launch a £500 million “Sovereign AI Unit” on Thursday evening. It will provide startups with investment of up to £20 million and access to compute, procurement opportunities and unique datasets.

James Wise, an investor who chairs the unit, said OpenAI’s decision was a “shame,” but the U.K. is “not the natural home” for large-scale AI data centers, and should instead prioritize becoming “the best place for companies in areas of AI where we have abundant strengths.”

Frank Hersey contributed additional reporting.