Trump-friendly investment pledges bear an asterisk

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Gabriel Rubin

WASHINGTON, Jan 24 (Reuters Breakingviews) - The world’s technology giants have a big carrot to dangle at the White House’s door: announcing eye-popping investments credited to the president. It’s an old trick rolled out under prior administrations. But Tuesday’s unveiling of Stargate, a supposedly $500 billion infrastructure plan for artificial intelligence, reaches a new scale. It’s easy to see the win-win of giving the commander-in-chief a splashy headline in exchange for a signal to the rest of the U.S. government and competitors that a company has his blessing. Problem is, promised projects all too often evaporate.

SoftBank Group’s 9984.T Masayoshi Son, Oracle’s ORCL.N Larry Ellison and OpenAI’s Sam Altman accompanied President Donald Trump as he announced their joint venture. Altman said that “we wouldn’t be able to do this without you” - even if, as the Washington Post reported, the ChatGPT maker’s boss began discussing plans well before the U.S. presidential election. An initial $100 billion pledged “immediately” includes money already spent on a project in Texas. Where the rest of the cash comes from is unclear, as the Financial Times reported.

More concrete is the benefit companies gain from a more friendly regulatory environment. Son, who pledged a $50 billion investment drive ahead of the president’s first term in 2016, should know. SoftBank-backed wireless company Sprint finally clinched a merger with T-Mobile TMUS.O thanks to Trump-appointed regulators’ blessing. AI is no less exposed, whether to antitrust worries about OpenAI’s close partnership with Microsoft MSFT.O or humdrum issues of permitting. The president said he would help smooth Stargate’s path.

History suggests not to take follow-through for granted. During Trump’s first term, Taiwanese manufacturer Foxconn won billions in subsidies to build an LCD panel factory in electorally-crucial Wisconsin; the site’s development was drastically scaled back. Investors including General Motors GM.N swooped in to back EV manufacturer Lordstown Motors as it took over at a closed GM factory in midwestern Ohio after Trump promised help for autoworkers. Billions in pledged investments withered, and it declared bankruptcy in 2023, having never reached its employment targets.

All of this represents a shifting calculus after the outgoing administration of President Joe Biden sought to beef up loan and grant programs for semiconductors and renewable energy. Out of fear of financing flops, agencies were, if anything, overly cautious in deploying capital, pushing out many major loans only during Biden’s final weeks in office. Meanwhile, his competition enforcers launched a multi-front effort to crack down on Big Tech. A photo opportunity and some flattery is an easier gambit.

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CONTEXT NEWS

U.S. President Donald Trump on Jan. 21 announced that OpenAI, SoftBank and Oracle will form a joint venture called Stargate, with a plan to invest $500 billion in artificial intelligence infrastructure. Trump said he will aid the project with emergency orders.

The announcement follows SoftBank Group CEO Masayoshi Son's own appearance with Trump on Dec. 16, when they announced that the Japanese group would invest $100 billion in the United States over the next four years. Trump said that the investment would create 100,000 jobs focused on artificial intelligence and related infrastructure, with the money to be deployed before the end of Trump’s term.