OpenAI might have hinted — and backtracked — at a possible backstop of its AI datacenter investments by the US government, but the government doesn’t seem to be in any mood to be involved.
Former PayPal executive David Sacks, now the crypto and AI czar of the US government, has said that there will be no bailout of AI companies should they fail if their massive investments in datacenters don’t work out. “There will be no federal bailout for AI. The U.S. has at least 5 major frontier model companies. If one fails, others will take its place,” be posted on X.
“That said, we do want to make permitting and power generation easier. The goal is rapid infrastructure buildout without increasing residential rates for electricity. Finally, to give benefit of the doubt, I don’t think anyone was actually asking for a bailout. (That would be ridiculous.) But company executives can clarify their own comments,” he added.
Sacks appeared to be responding following speculation after OpenAI CFO had said at an event that the company would seek a “backstop” from the US government over its AI investments. “This is where we’re looking for an ecosystem of banks, private equity, maybe even governmental,” Friar said, noting that federal loan guarantees would “really drop the cost of the financing” and enable OpenAI and its investors to borrow at lower rates. Hours later, she clarified her remarks. “I want to clarify my comments earlier today. OpenAI is not seeking a government backstop for our infrastructure commitments. I used the word ‘backstop’ and it muddied the point,” she wrote. Friar emphasized that she was making a broader point about American technological strength requiring both private sector and government involvement, adding that “the US government has been incredibly forward-leaning and has really understood that AI is a national strategic asset.”
Interestingly, OpenAI CEO Sam Altman had also brought up the government in an interview published yesterday. “At some level, when something gets sufficiently huge, whether or not they are on paper, the federal government is kind of the insurer of last resort, as we’ve seen in various financial crises and insurance companies screwing things up,” he had said. “I guess, given the magnitude of what I expect AI economic impact to look like, I do think the government ends up as the insurer of last resort, but I think I mean that in a different way than you mean that, and I don’t expect them to actually be writing the policies in the way that maybe they do for nuclear,” he had added.
But the US government seems to be in no mood to entertain ideas of government bailouts for AI companies. It would appear that this is a sound move. Guaranteed government bailouts are usually a recipe for disaster, given how they encourage misplaced incentives and indiscriminate risk taking. And like Sacks said, there are plenty of frontier model companies — if some of them end up failing, as will likely be the case, others would be only too happy to take their place.