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This story originally appeared in The Algorithm, our weekly newsletter on AI. To get stories like this in your inbox first,sign up here. Just a week in, the AI sector has already seen its first battle of wits under the new Trump administration. The clash stems from two key pieces of news: the announcement of the Stargate project, which would spend $500 billionmore than the Apollo space programon new AI data centers, and the release of a powerful new model from China. Together, they raise important questions the industry needs to answer about the extent to which the race for more data centerswith their heavy environmental tollis really necessary. A reminder about the first piece: OpenAI, Oracle, SoftBank, and an Abu Dhabibased investment fund called MGX plan to spend up to $500 billion opening massive data centers around the US to build better AI. Much of the groundwork for this project was laid in 2024, when OpenAI increased its lobbying spending sevenfold (which we were first to report last week) and AI companies started pushing for policies that were less about controlling problems like deepfakes and misinformation, and more about securing more energy. Still, Trump received credit for it from tech leaders when he announced the effort on his second day in office. I think this will be the most important project of this era, OpenAIs Sam Altman said at the launch event, adding, We wouldnt be able to do this without you, Mr. President. Its an incredible sum, just slightly less than the inflation-adjusted cost of building the US highway system over the course of more than 30 years. However, not everyone sees Stargate as having the same public benefit. Environmental groups say it could strain local grids and further drive up the cost of energy for the rest of us, who arent guzzling it to train and deploy AI models. Previous research has also shown that data centers tend to be built in areas that use much more carbon-intensive sources of energy, like coal, than the national average. Its not clear how much, if at all, Stargate will rely on renewable energy. Even louder critics of Stargate, though, include Elon Musk. None of Musks companies are involved in the project, and he has attempted to publicly sow doubt that OpenAI and SoftBank have enough of the money needed for the plan anyway, claims that Altman disputed on X. Musks decision to publicly criticize the presidents initiative has irked people in Trumps orbit, Politico reports, but its not clear if those people have expressed that to Musk directly. On to the second piece. On the day Trump was inaugurated, a Chinese startup released an AI model that started making a whole bunch of important people in Silicon Valley very worried about their competition. (This close timing is almost certainly not an accident.) The model, called DeepSeek R1, is a reasoning model. These types of models are designed to excel at math, logic, pattern-finding, and decision-making. DeepSeek proved it could reason through complicated problems as well as one of OpenAIs reasoning models, o1and more efficiently. Whats more, DeepSeek isnt a super-secret project kept behind lock and key like OpenAIs. It was released for all to see. DeepSeek was released as the US has made outcompeting China in the AI race a top priority. This goal was a driving force behind the 2022 CHIPS Act to make more chips domestically. Its influenced the position of tech companies like OpenAI, which has embraced lending its models to national security work and has partnered with the defense-tech company Anduril to help the military take down drones. Its led to export controls that limit what types of chips Nvidia can sell to China. The success of DeepSeek signals that these efforts arent working as well as AI leaders in the US would like (though its worth noting that the impact of export controls for chips isnt felt for a few years, so the policy wouldnt be expected to have prevented a model like DeepSeek). Still, the model poses a threat to the bottom line of certain players in Big Tech. Why pay for an expensive model from OpenAI when you can get access to DeepSeek for free? Even other makers of open-source models, especially Meta, are panicking about the competition, according to The Information. The company has set up a number of war rooms to figure out how DeepSeek was made so efficient. (A couple of days after the Stargate announcement, Meta said it would increase its own capital investments by 70% to build more AI infrastructure.) What does this all mean for the Stargate project? Lets think about why OpenAI and its partners are willing to spend $500 billion on data centers to begin with. They believe that AI in its various formsnot just chatbots or generative video or even new AI agents, but also developments yet to be unveiledwill be the most lucrative tool humanity has ever built. They also believe that access to powerful chips inside massive data centers is the key to getting there. DeepSeek poked some holes in that approach. It didnt train on yet-unreleased chips that are light-years ahead. It didnt, to our knowledge, require the eye-watering amounts of computing power and energy behind the models from US companies that have made headlines. Its designers made clever decisions in the name of efficiency. In theory, it could make a project like Stargate seem less urgent and less necessary. Thus far, DeepSeek doesnt seem to have sparked such a change in approach. OpenAI researcher Noam Brown wrote on X, I have no doubt that with even more compute it would be an even more powerful model. If his logic wins out, the players with the most computing power will win, and getting it is apparently worth at least $500 billion to AIs biggest companies. But lets rememberannouncing it is the easiest part. Now read the rest of The Algorithm Deeper Learning Whats next for robots Many of the big questions about AI-how it learns, how well it works, and where it should be deployedare now applicable to robotics. In the year ahead, we will see humanoid robots being put to the test in warehouses and factories, robots learning in simulated worlds, and a rapid increase in the militarys adoption of autonomous drones, submarines, and more. Why it matters: Jensen Huang, the highly influential CEO of the chipmaker Nvidia, stated last month that the next advancement in AI will mean giving the technology a body of sorts in the physical world. This will come in the form of advanced robotics. Even with the caveat that robotics is full of futuristic promises that usually arent fulfilled by their deadlines, the marrying of AI methods with new advancements in robots means the field is changing quickly. Read more here. Bits and Bytes Leaked documents expose deep ties between Israeli army and Microsoft Since the attacks of October 7, the Israeli military has relied heavily on cloud and AI services from Microsoft and its partner OpenAI, and the tech giants staff has embedded with different units to support rollout, a joint investigation reveals. (+972 Magazine) The tech arsenal that could power Trumps immigration crackdown The effort by federal agencies to acquire powerful technology to identify and track migrants has been unfolding for years across multiple administrations. These technologies may be called upon more directly under President Trump. (The New York Times) OpenAI launches Operatoran agent that can use a computer for you Operator is a web app that can carry out simple online tasks in a browser, such as booking concert tickets or making an online grocery order. (MIT Technology Review) The second wave of AI coding is here A string of startups are racing to build models that can produce better and better software. But its not only AIs increasingly powerful ability to write code thats impressive. They claim its the shortest path to superintelligent AI. (MIT Technology Review)
