Elon Musk has his doubts about Stargate. Here’s why he may be right.

In the case of Stargate, the AI joint venture that includes OpenAI, his skepticism may be warranted, perhaps for a rare change.

The big numbers that have been bandied about in relation to Stargate — a project proposed by President Donald Trump on Tuesday that guarantees at least $500 billion of future domestic artificial-intelligence investments — have not sat well with Musk. Elon Musk, Tesla Inc.’s TSLA-2.11% chief executive, who runs his own AI startup, questioned whether SoftBank Group Corp., the lead investor in the joint venture, is guaranteed to have access to all the capital it is offering.

Here’s a condensed version with key takeaways:

• Stargate AI Venture: Proposed by Donald Trump, Stargate promises $500 billion in AI investments but faces skepticism over funding and execution.
• Elon Musk’s Criticism: Musk questioned SoftBank’s financial capability and raised doubts about the project’s long-term feasibility.
• Job Creation Concerns: Stargate claims to create “hundreds of thousands of jobs,” but most work may be temporary and focused on data center construction.
• OpenAI’s Potential Gain: The project could benefit OpenAI significantly by advancing its AGI goals through access to large-scale data centers.
• Historical Parallels: Similar large-scale initiatives, like the U.S. Chips Act and Foxconn’s factory, have struggled to deliver on initial promises.

“They don’t really have the money,” Musk wrote on X, the social-media platform he owns. “I know that for a fact.”

Other early investors include OpenAI, Oracle Corp. and MGX of the United Arab Emirates. Although MarketWatch doesn’t have access to the internal discussions at SoftBank around funding, Dion Hinchcliffe, vice president of CIO practice at Futurum Research, said he expects that there will be other investors clamoring to get involved. But he said only the most well-heeled — those with the pockest books deep enough to endure, like Blackstone Inc.

BX+0.69%, would be able to join. There’s one more big reason investors ought to take these huge investment figures with a grain of salt. Politicians love to talk in massive numbers as they pledge bigger investments and more jobs, but the projects attached to them don’t always go as advertised.

This should be familiar ground for Trump. Once in office, Foxconn 2354 +0.90% built a $10 billion factory in Wisconsin, which was celebrated during the Trump era as part of a plan to save American manufacturing. But Apple Inc.’s Taiwanese manufacturer of the devices, Foxconn Technology Group, AAPL+0.53 iPhones ultimately scaled down those ambitions significantly, with Reuters reporting in 2021 that Foxconn decided to invest only $672 million and cut the jobs to be created to just 1,454, a far cry from the 13,000 jobs promised back in 2017. Now the company employs more than 1,000 people, building data servers, according to Wisconsin Public Radio.

And then there was the U.S. Chips Act under President Joe Biden, which made $280 billion available to new semiconductor plants in the U.S. But a number of the high-profile new facilities tied to that program mid-point have been beset by construction delays, confronted labor shortages and encountered regulatory issues.

The Stargate venture says its infrastructure will generate “hundreds of thousands of jobs.” But on the company’s various earnings calls with Wall Street, Oracle’s co-founder and Chief Technology Officer, Larry Ellison, has frequently touted Oracle’s autonomous database, the autonomous capabilities of its cloud-computing services and its low labor costs. So if the forecasts are for building the data centers, that work will mostly go away once the plants are finished. And if “many jobs” are somehow going to emerge thanks to better AI, the companies are remaining silent about what other jobs will be eliminated.

OpenAI could be the biggest beneficiary of all, as the ChatGPT creator could deploy data centers built by Oracle to process much larger volumes of data, helping achieve Chief Executive Sam Altman’s long-sought goal of AGI (artificial general intelligence), or the moment AI matches or exceeds human intelligence.

At the same time, Musk is the owner of a rival AI company, xAI, which might help explain why he aimed a barb at Stargate — despite his proximity to Trump — and picked a public fight with Altman, with whom he has had a fractious relationship over the future of OpenAI.

In response to Musk’s posts, Altman wrote that Musk was “wrong” about his claim and invited him to visit tour the first site while also calling Musk “the most inspiring entrepreneur of our time.”

Investors should ask themselves what the advocates of the venture are talking about when they assert that Stargate will benefit the U.S. through the “re-industrialization of the United States.” It seems that building 10 big data centers in Texas to train large language models and then run those models serves one company — OpenAI — and its hardware and software vendors, not the rest of the U.S. industrial economy.

Shares of the companies that make the hardware and software rose Wednesday on the news, especially the stock of Nvidia NVDA +4.43%, Oracle ORCL+6.75%, ARM ARM +15.93% and lead investor Softbank 9984 +6.11%. Which means investors should recall that major projects involving political stakes can radically change in the future.

So whereas Musk has issued many dubious claims in the past — just point to his promises for Tesla’s soon-to-be-robotaxis and full self-driving features — in this case, his prudent skepticism towards a rival seems warranted.