WSJ : OpenAI’s Planned Cloud Spending Hits $750 Billion as Computing Efforts Ram

OpenAI’s Planned Cloud Spending Hits $750 Billion as Computing Efforts Ramp Up
The AI giant has committed $20 billion to a new data-center project in Georgia and hired an architect of Elon Musk’s computing build-out

  • OpenAI raised its projected spending on computing power to around $750 billion through 2030, up from roughly $600 billion earlier this year.
  • OpenAI committed $20 billion to a Georgia data center, marking the first site where the firm is the lead designer and developer.
  • OpenAI’s spending has caused tension between Chief Executive Sam Altman and Chief Financial Officer Sarah Friar ahead of a planned IPO.

OpenAI is scaling up its data-center ambitions—and its budget for spending on them.

The artificial-intelligence company has raised its projected spending on computing power to around $750 billion through 2030, up from a projection of roughly $600 billion earlier this year, according to a person with knowledge of its projections.

The increase reflects new agreements with cloud-computing providers as OpenAI races to lock up the enormous amounts of computing capacity it needs to develop and run its AI models. OpenAI’s spending on cloud computing has become a central focus of Chief Executive Sam Altman’s leadership team and has been a source of tension between him and his chief financial officer, Sarah Friar, ahead of the company’s planned initial public offering.

The company said Wednesday it would invest $20 billion to kick off a data center called Project Camellia, in Effingham County, Ga. Sachin Katti, OpenAI’s vice president of compute strategy, said the company has contracted with utility Georgia Power to receive 3.2 gigawatts of power between 2028 and 2032. The project represents the first site in which OpenAI is the lead designer and developer. At its other sites, OpenAI rents chips from cloud providers such as Oracle and Amazon Web Services.

OpenAI has also hired Brent Mayo, one of the architects of Elon Musk’s data-center build-out, according to people with knowledge of the hire.

Mayo, who left Musk’s xAI earlier this year, played a key role in helping that company build its first Colossus supercomputer facility in Memphis, overseeing the work needed to rapidly install and bring online large clusters of AI chips.

As OpenAI’s head of data-center build and delivery, Mayo’s focus is on ensuring that data centers its cloud partners build are done on time. He will also be involved in the new Georgia data-center project.

Mayo reports to Uday Ruddarraju, who was promoted this month to become OpenAI’s chief technology officer of computing capacity. Ruddarraju, who reports to President Greg Brockman, also previously worked on xAI’s Colossus before leaving the startup for OpenAI last year.

Mayo’s hire is the latest in a series of changes inside OpenAI’s infrastructure organization, which has gone through several evolutions since Altman announced the company’s Stargate initiative at the White House in January 2025.

Altman originally envisioned Stargate as a joint venture with SoftBank and Oracle that would invest as much as $500 billion in U.S. artificial-intelligence infrastructure over four years.

But that effort struggled to get off the ground.

Now, OpenAI is reviving its internal effort to take more control over its data centers, people familiar with the matter said.

The company is in the process of choosing a partner that will build and operate the Georgia site, Katti, the vice president of compute strategy, said in an interview. OpenAI has already acquired the land for the project.

Katti declined to share how much money OpenAI has paid Georgia Power to reserve the power but said it was a “meaningful amount,” which gives the utility the confidence to build additional generation capacity.

OpenAI executives have held meetings with local and state officials, as well as with schools and other community leaders, to gather feedback on their proposed data center, which will be located in the Savannah Gateway Industrial Hub.

So far, the project has local support from the economic development group, the county manager, and the school district. Local officials said in a statement that they visited several data centers and did their own research before deciding to move forward.

The 3.2 gigawatts that OpenAI expects to eventually receive in Effingham County would come in addition to the computing deals the company has already signed with other partners.

It has previously contracted with Oracle for data-center capacity totaling 6 gigawatts, which is mostly still under development. At the end of February, OpenAI increased its multiyear cloud-computing deal with Amazon Web Services to $138 billion over eight years, including 2 gigawatts on Amazon’s homegrown AI chip, known as Trainium. OpenAI also last year committed an additional incremental $250 billion in cloud spending to Microsoft Azure, though it didn’t provide a timeline for that spending.

After Altman’s proclamation that OpenAI planned to spend $1.4 trillion on computing capacity set off concerns over the company’s financial stability, Friar, the CFO, walked back that claim, quietly reassuring investors that OpenAI planned to spend $600 billion through 2030.

She has also privately voiced concerns about Altman’s spending plans. Friar told company leaders she worried that the company might not be able to pay for future computing contracts if revenue doesn’t grow fast enough.

EU to review airline ownership rules, threatening easyJet bids - Reuters New

Alerts History
  • 22 Jul 2026 03:21:55 PM - EXCLUSIVE-EU OFFICIAL: WE WILL RELEASE REVIEW OF AVIATION OWNERSHIP RULES IN THE AUTUMN
  • 22 Jul 2026 03:21:56 PM - EXCLUSIVE-EU OFFICIAL: WE WILL CLARIFY WHAT CORPORATE STRUCTURES ARE ALLOWED, ESPECIALLY ON CONTROL AND OWNERSHIP
  • 22 Jul 2026 03:21:57 PM - EXCLUSIVE-EU OFFICIAL: WE NEED TO ADEQUATELY PROTECT STRATEGIC AUTONOMY
  • 22 Jul 2026 03:21:58 PM - EXCLUSIVE-EU OFFICIAL: THIS IS TO ENSURE FOREIGN INVESTORS DON'T HAVE FULL CONTROL OF EU AIRLINES
  • 22 Jul 2026 03:21:58 PM - EXCLUSIVE-EU OFFICIAL: THIS COULD IMPACT THE PROPOSED EASYJET TAKEOVER DEAL BY APOLLO OR CASTLELAKE

EU to review airline ownership rules, threatening easyJet bids - Reuters News
Sentiment:
Balanced
By Joanna Plucinska, Julia Payne and Alessandro Parodi

  22 Jul 2026 03:22:25 PM

Open in LSEG Workspace
  • Review due in the autumn could affect Apollo's proposed £5.7 billion easyJet takeover
  • EU aims to clarify permitted corporate structures around airline control and ownership
  • Apollo, Castlelake and easyJet have not discussed deal details with EU regulators, the official said
FARNBOROUGH, England, July 22 (Reuters) - The European Union is preparing a review of airline ownership rules to prevent foreign investors from gaining effective control of carriers, an EU official said, a move that could complicate U.S. bids for low-cost airline easyJet EZJ.L.
The EU review, previously unreported, would "protect strategic autonomy" to ensure control of regional carriers remains within the bloc, the official said. It comes amid a bidding war between two U.S. investment firms for the control of major European budget airline easyJet, which is likely to test the limits of EU rules that demand 51% local ownership.
"This is to ensure that foreign investors don't have full control," the official told Reuters, asking not to be named due to the sensitivity of the matter. "We need to make sure we have sufficient headroom when it comes to control."
EasyJet earlier this month backed a £5.7 billion ($7.65 billion) offer by Apollo Global Management APO.N, which trumped an earlier £5.5 billion bid by Castlelake, but did not explain how it plans to meet EU majority ownership requirements, a key hurdle for any non-EU acquisition of a European airline.
If the deal went through, it could set an important precedent for European airlines, opening the door to private equity buyouts in a closely regulated industry where takeovers usually involve another carrier, often with government backing.
The official said that the review, likely in the autumn, would look to clarify which kinds of corporate structures were allowed, especially around control and ownership.
The official said Apollo, Castlelake and easyJet had not spoken to the European regulators about the details of their proposed deals.
EasyJet and Apollo declined to comment. Castlelake did not immediately respond to a request for comment.
"The concern is that the industry is on the wrong foot, thinking that we no longer enforce the rules strictly. People will go down the wrong alley because there's a wrong perception," the official added.

(Reporting by Joanna Plucinska in Farnborough, Julia Payne in Brussels, Alessandro Parodi in Gdansk; Editing by Adam Jourdan, Joe Brock and Sharon Singleton)

>>> Europe : Brokers Upgrades & Downgrades - 22nd of July 2026 V2(+)

>>> Up
* Atlas Copco Raised to Buy at Goldman; PT 229 kronor
* CoreWeave Raised to Buy at Truist on Signs of Broadening Demand
* Epiroc Raised to Buy at Pareto Securities; PT 280 kronor
* Epiroc Raised to Overweight at JPMorgan; PT 320 kronor
* Hanza Raised to Buy at Nordea; PT 179 kronor
* Jet2 PT Raised to 2,100 pence from 1,800 pence at Peel Hunt (+)
* Metrovacesa Raised to Outperform at Renta 4; PT 12.30 euros (+)
* Nestle Raised to Buy at Jefferies; PT 99 Swiss francs
* Porsche Raised to Buy at Bankhaus Metzler; PT 64 euros (+)
* Reckitt Raised to Buy at Jefferies; PT 5,900 pence
* Sonova Raised to Buy at UBS; PT 242 Swiss francs
* Wartsila Raised to Buy at ABG; PT 35 euros
* Wartsila Raised to Accumulate at Inderes; PT 33 euros
* Wartsila Raised to Hold at Handelsbanken; PT 30 euros
* Wartsila Raised to Accumulate at OP Corporate Bank; PT 33 euros (+)

>>> Down
* AIB Group Cut to Market Perform at KBW; PT 10.80 euros
* Amcor Cut to Hold at Jefferies
* Danone Cut to Underperform at Jefferies; PT 62 euros
* Demant Cut to Neutral at UBS; PT 284 kroner
* Equinor Cut to Neutral at SB1 Markets; PT 365 kroner (+)
* Sandvik Cut to Neutral at JPMorgan; PT 400 kronor
* Travis Perkins Cut to Underweight at Barclays; PT 461 pence
* Rotork Cut to Hold at Peel Hunt
* Wienerberger Cut to Neutral at Citi; PT 22 euros

>>> Initiation
* Aberdeen Group Rated New Buy at Peel Hunt; PT 294 pence
* Altria Rated New Neutral at BTIG
* BAT Rated New Buy at BTIG; PT 5,800 pence
* Circle Internet Rated New Market Perform at Raymond James
* DigitalOcean Rated New Outperform at Baird
* Digital Turbine Rated New Buy at Benchmark; PT $15
* IBM Rated New Neutral at Baird
* Imperial Brands ADRs Rated New Neutral at BTIG
* Nedap NV Rated New Buy at Van Lanschot Kempen; PT 133 euros (+)
* Nebius Group Rated New Outperform at Baird
* Philip Morris Rated New Buy at BTIG; PT $216
* Siegfried Rated New Hold at Berenberg; PT 77 Swiss francs

>>> Call
* Atlas Copco Raised to Buy at Goldman on Chip, Oil Exposure (+)
* Aberdeen’s Recovery Becoming More Apparent, New Buy at Peel Hunt
* Epiroc Raised, Sandvik Cut as JPMorgan Switches Preference
* Wienerberger Cut to Neutral at Citi Following Guidance Downgrade

>>> Stoxx 600 Pre-Market Indications

  • GEA Group (G1A TH) +3.4%
  • Reckitt (3RB0 TH) +2.2%
  • Airbus (AIR TH) +2.1%
    • Airbus Financial Targets Send ‘Strong Signal’: Street Wrap
  • Akzo Nobel (AKU1 TH) +1.5%
    • Akzo Nobel Maintains FY Adjusted Ebitda Forecast
  • Symrise (SY1 TH) -1.3%
  • Var Energi (J4V TH) -2%
  • ASML (ASME TH) -2.2%
  • Prosus (1TY TH) -3.1%

>>> TradeGate Pre-Market Indications

DAX:
  • GEA Group (G1A TH) +4.1%
    • GEA Group Prelim 2Q Revenue Beats Estimates
  • Airbus (AIR TH) +2.3%
    • Airbus Financial Targets Send ‘Strong Signal’: Street Wrap
  • Symrise (SY1 TH) -1.3%
MDAX:
  • SUSS MicroTec (SMHN TH) +0.5%
  • Jenoptik (JEN TH) +0.5%
  • Aixtron (AIXA TH) -0.6%
  • Wacker Chemie (WCH TH) -0.6%
SDAX:
  • Friedrich Vorwerk Group SE (VH2 TH) +4.1%
  • Eckert & Ziegler (EUZ TH) -1.6%
    • German BaFin Starts Audit of Eckert & Ziegler’s 2024 Reports

>>> What to look at today - 22nd of July 2026

Chip stocks extended a global rally as investors renewed bets that the artificial intelligence trade has further room to run. Oil climbed on pessimism over US-Iran peace talks. MSCI’s Asia Pacific equities gauge rose 1%, extending Tuesday’s biggest one-day gain in a month. South Korea’s Kospi, a bellwether for AI investments, jumped 4% as the unwinding of leveraged bets that drove the benchmark nearly 30% below its peak appeared to be nearing an end. Chip bellwethers Samsung Electronics Co. and SK Hynix Inc. led gains. The rally in Asia followed a more than 5% jump in a US semiconductor gauge on Tuesday, rebounding from bear market territory last week, as investors awaited Alphabet Inc.’s guidance on AI spending. Even so, caution prevailed, with Nasdaq 100 futures falling 0.4%, S&P 500 contracts edging lower and European shares set for a tepid open. The rise in crude oil prices this week is reigniting inflation concerns, and pushed Treasury yields to their highest level in two months on Tuesday. Brent climbed 1.4% to $92.25 a barrel after US President Donald Trump minimized the prospect of immediate talks with Iran. Gold gained as much as 1.6% to about $4,142 an ounce — the highest level in two weeks — as dip buyers supported prices despite escalating Middle East tensions. The rally in technology stocks follows weeks of volatility in the year’s best-performing corner of the market as investors questioned whether massive AI spending will translate into commensurate returns. The focus now shifts to earnings from Alphabet and Tesla Inc. beginning Wednesday, with lofty expectations leaving little room for disappointment. Concerns about expensive valuations drove a selloff in chip stocks earlier this month, pushing the Philadelphia Semiconductor Index briefly into a bear market last week. The gauge has gained two days in a row since then, while a chip benchmark in Asia jumped more than 2.4% on Wednesday. Other precious metals also gained. Silver climbed 1.5% to about $59.60 an ounce, while platinum also advanced. The yen was little changed in Asian trade after sliding past 163 per dollar on Tuesday for the first time since 1986, testing Japanese authorities’ resolve to intervene. Two senior Japanese officials warned that authorities are ready to take action in the currency market if necessary. Treasuries held Tuesday’s losses, which pushed 10- and 30-year yields to the highest levels in about two months. The surge in oil prices has rekindled concerns that inflationary pressures will prompt the Federal Reserve to raise interest rates. The market is learning to live with higher oil prices, but “the big question is, for how long?” Tim Waterer, chief market analyst at KCM Trade in Sydney, wrote in a note. “Right now, solid earnings are coming to the rescue and are helping divert market focus away from the fact that oil prices are advancing.” Attention is also on pharmaceutical companies after Trump announced plans to impose 100% tariffs on generic drugs imported to the US, beginning in August 2028. Indian pharma stocks slipped. That said, investors remain focused on company results. US earnings growth should continue to support stocks in the second half of the year, even as near-term bullish positioning and macro headwinds weigh on share prices, according to Goldman Sachs Group Inc. strategists. Nearly 20% of companies in the S&P 500 by market value are slated to report results this week. Alphabet and Intel will give investors a clearer read on how AI spending is reshaping the tech industry. Intel reports Thursday. While the recent selloff in AI-related shares has raised questions about the durability of the trade, some strategists see it as a reset rather than a sign of deteriorating fundamentals. US After Hours SMCI +18% jumps on guidance, DELL +5.7%, HPE +4.9%, MRVL +2.1%, MU +1.5% higher in sympathy; FNWD +20.2% to be acquired; PEGA -13.4%, AIR -4.9% lower on earnings.

Nikkei +0.02% Hang Seng -1.14% CSI -0.53% Kospi +1.3% Shanghai -0.15% Shenzen -1.14%

Eur$ CNH CNY JPY GBP CHF RUB TRY WTI$ Gold BTC ETH

S&P -0.16% Nasdaq -0.60% EuroStoxx +0.11% FTSE +0.22% Dax +0.26% SMI +0.25%

Macro :
- Oklo, X-Energy Join Trump Bid to Speed Nuclear Reactors for AI
- Spain’s Trillo Nuclear Plant Shut Down After Leak Detected
- TSMC to Hike Chip Prices by Up to 10% in 2027, Nikkei Says
- Major Utilities, Data-Center Developers Sign On to Trump's Ratepayer-Protection Pledge -- WSJ
- Goldman Sachs creates private markets platform as rich investors seek the next SpaceX and Stripe

Keep an eye on :
- AIR FP : Airbus Board Approves Share Buyback of €5B Over Three Years
- AKZA NA : Akzo Nobel Maintains FY Adjusted Ebitda Forecast
- AMZN US : Bezos Approached to Join Bid for Liverpool FC Stake: Sky
- BRNK GY : Branicks Postpones Publication of 2025 Report
- BT/A LN :
- DYN US : Dyne Therapeutics Offering of 18.3m Shares Prices at $20.50 Each
- EFGN SW : EFG International AUM CHF196.3B Vs. CHF185.0B H/H
- ENG SM : Enagas 1H Ebitda Beats Estimates
- EQNR NO : Equinor 2Q Adjusted Operating Income After Tax Beats Estimates
- EQT US : EQT Corp 2Q Adjusted EPS Misses Estimates
- VH2 GY : Friedrich Vorwerk FY Outlook Below Consensus
- GRMN US : Garmin Debuts $200 Screenless Fitness Band in Challenge to Whoop
- G1A GY : GEA Group Prelim 2Q Revenue Beats Estimates
- GT US : Goodyear Tire to Close Manufacturing Facility, Cut ~1,750 Jobs
- GTT FP : GTT Gets Order From Samsung for Tank Design of One LNG Carrier
- HIAB FH : Hiab 2Q Comparable Operating Profit Beats Estimates
- HNSA NA : Hansa Biopharma 2Q Net Revenue Misses Estimates
- HUBN SW : Huber+Suhner to Buy Ingun; No Terms
- IBE SM : Iberdrola Agrees to Buy 80% Stake in Caruna for €2 Billion
- IBRK US : Interactive Brokers 2Q Adjusted EPS Beats Estimates
- INTC US : SK Hynix Says No Plans to Acquire Intel’s Ohio Chip Campus
- KESKOB FH : Kesko Narrows FY Adjusted Ebit Forecast
- KKR US : KKR-Backed Vertis Said to Be Frontrunner for Megha’s Road Assets
- LONN SW : Lonza Sees FY Core Ebitda Margin 33% to 34%, Saw Above 32%
- META US : Meta’s AI Incubator Developing An OpenRouter Rival: Information
- NDM US : Nano Dimension Announces Management Change
- NHY NO : Norsk Hydro 2Q Adjusted Ebitda Beats Estimates
- NOVN SW : Sandoz: Too Early to Assess Effects of US Tariffs on Generics
- Open AI IPO : OpenAI Says Its AI Models Breached Startup Hugging Face’s System
- Open AI IPO : OpenAI Is Adding Two Independent Board Members Ahead of IPO -- WSJ
- OPM FP : OPmobility 1H Operating Profit Misses Estimates
- OSUR US : FDA Grants Emergency Authorization for Bundibugyo Ebola Test
- RAND NA : Randstad 2Q Revenue Beats Estimates
- RHM GY : Rheinmetall to More Than Double Gunpowder Output at German Plant
- SPM IM : Saipem Signs New Contract for About $260M in Ivory Coast
- 005930 KS : Samsung in Talks to Invest in Mistral at €20B Valuation: FT
- SDZ SW : Sandoz: Too Early to Assess Effects of US Tariffs on Generics
- SAN SM : Santander 2Q Net Income Beats Estimates
- SMCI US : Super Micro Shares Jump 20% on New Margins, Backlog Forecasts
- TKA AV : Telekom Austria 2Q Revenue Beats Estimates
- TKMS GY : TKMS Withdraws Offer for Kiel Shipyard: Manager Magazin
- VK FP : Vallourec Wins Allseas Contract for Atapu 2 Brazil Project
- VACN SW : VAT Sees 3Q Net Sales CHF355M to CHF385M
- VACN SW : VAT To Buy Japan’s Atonarp for ~CHF110m in Cash

>>> Europe : Brokers Upgrades & Downgrades - 22nd of July 2026

>>> Up
* Atlas Copco Raised to Buy at Goldman; PT 229 kronor
* CoreWeave Raised to Buy at Truist on Signs of Broadening Demand
* Epiroc Raised to Buy at Pareto Securities; PT 280 kronor
* Epiroc Raised to Overweight at JPMorgan; PT 320 kronor
* Hanza Raised to Buy at Nordea; PT 179 kronor
* Nestle Raised to Buy at Jefferies; PT 99 Swiss francs
* Reckitt Raised to Buy at Jefferies; PT 5,900 pence
* Sonova Raised to Buy at UBS; PT 242 Swiss francs
* Wartsila Raised to Buy at ABG; PT 35 euros
* Wartsila Raised to Accumulate at Inderes; PT 33 euros
* Wartsila Raised to Hold at Handelsbanken; PT 30 euros

>>> Down
* AIB Group Cut to Market Perform at KBW; PT 10.80 euros
* Amcor Cut to Hold at Jefferies
* Danone Cut to Underperform at Jefferies; PT 62 euros
* Demant Cut to Neutral at UBS; PT 284 kroner
* Sandvik Cut to Neutral at JPMorgan; PT 400 kronor
* Travis Perkins Cut to Underweight at Barclays; PT 461 pence
* Rotork Cut to Hold at Peel Hunt
* Wienerberger Cut to Neutral at Citi; PT 22 euros

>>> Initiation
* Aberdeen Group Rated New Buy at Peel Hunt; PT 294 pence
* Altria Rated New Neutral at BTIG
* BAT Rated New Buy at BTIG; PT 5,800 pence
* Circle Internet Rated New Market Perform at Raymond James
* DigitalOcean Rated New Outperform at Baird
* Digital Turbine Rated New Buy at Benchmark; PT $15
* IBM Rated New Neutral at Baird
* Imperial Brands ADRs Rated New Neutral at BTIG
* Nebius Group Rated New Outperform at Baird
* Philip Morris Rated New Buy at BTIG; PT $216
* Siegfried Rated New Hold at Berenberg; PT 77 Swiss francs

>>> Call
* Aberdeen’s Recovery Becoming More Apparent, New Buy at Peel Hunt
* Epiroc Raised, Sandvik Cut as JPMorgan Switches Preference
* Wienerberger Cut to Neutral at Citi Following Guidance Downgrade

The Information : Mercor’s Fast Growth Relies on Biggest AI Companies, Documents

Mercor’s Fast Growth Relies on Biggest AI Companies, Documents Show

The Takeaway
  • Nearly all of Mercor’s gross revenue this year came from AI model makers
  • Mercor’s gross revenue, or sales before paying its contractors, jumped 70% in first half from full-year 2025
  • Three-year-old startup predicts it will increase revenue from non-AI customers

Mercor, a three-year-old data startup whose army of contractors teaches AI to give better answers, is growing fast but relies heavily on revenue from AI foundation model companies, financial documents seen by The Information show.

The company generated $614 million in gross revenue in the first half of the year, up 70% from all of last year, according to the documents. About 91% of the first half revenue came from makers of AI foundation models. Mercor’s top customers include OpenAI, Anthropic and Google DeepMind, the company has told potential investors, along with newer AI labs such as open-source provider Reflection AI and Thinking Machines Lab.

The concentration among the biggest AI companies points to a simmering concern among investors: Many startups owe much of their growth to a few large customers whose decision to take their business elsewhere—or handle it internally—could abruptly cool the torrid trajectory of these startups. It is a central question as Mercor discusses a new round of funding that, according to a person familiar with the matter, could value it at $20 billion, double its level last fall.

That higher valuation would follow Mercor’s March disclosure that it was among the companies targeted by hackers in a supply-chain attack. The revelation prompted Meta Platforms to pause its work with the company, according to Wired. Meta, which also owns a 49% stake in Mercor rival Scale AI, has not resumed working with Mercor, according to the person.

Mercor said last month the impact on customer information was “very limited,” and few contractors had “sensitive information” breached.

The startup predicts that the concentration of its customers in foundation models will fade over the next half decade as it sells more of its evaluation and training services to other AI startups, including app developers that need to evaluate their customized models, as well as large companies outside AI that want to make sure their agents are working as intended. The company’s fundraising material listed financial firms such as Ramp, Blue Owl and Citi as customers.

By 2028, Mercor expects gross revenue from AI startups and Fortune 2000 companies combined to eclipse gross revenue from foundation models. By 2030, it expects foundation models will represent just under one-third of its anticipated gross revenue of nearly $69 billion. Fortune 2000 companies, in contrast, will make up 57%, Mercor has told potential investors.


The documents point to other constraints on the business, which has fetched increasingly high valuations as revenue has surged.

It pays about two-thirds of its gross revenue to contractors, the legion of lawyers, doctors, writers and doctorate holders that grade AI models’ answers to questions. Those payouts kept its gross margin to 27% last year and 33% in the second quarter of this year. It anticipates gross margins rising to 46% next year and 56% in 2030.

Mercor’s past gross margins aren’t far off from comparable metrics at OpenAI and Anthropic, which both missed their own gross margin forecasts as the costs of running their AI models spiked. But Anthropic late last year expected gross margins could hit 77% in 2029, while OpenAI earlier this year predicted gross margins would close in on 70% toward the end of the decade.

Those levels would put the model makers close to best-in-class software companies such as GitLab, which reported an 86% gross margin in its most recent financial quarter—a sharp contrast with Mercor.

Rocketing Revenue

Mercor was started by college dropout Brendan Foody and two of his high school classmates and has emerged as one of the most prominent in a competitive cohort of startups. The companies, which include Scale AI, Handshake AI and Surge AI, supply specialized training data to AI companies looking to improve or fine-tune their models.

Mercor’s annualized gross revenue—monthly revenue multiplied by 12—hit $2 billion in June, double the pace from early this year, and it told potential investors it expects to hit $2.8 billion in annualized gross revenue by year end.

Similarly, rival Handshake’s gross revenue jumped 82% by April from January, to an annualized pace of nearly $1 billion.

The businesses, which rely mainly on human contractors, risk losing demand to startups that specialize in designing copies of popular apps like Salesforce or Excel to teach AI how to use those apps. Some researchers say these fake apps, otherwise known as reinforcement learning environments, work better for certain disciplines than human experts do.

Earlier this month, Mercor said it had bought Deeptune, a startup that designs RL environments, which Mercor said will help the company quickly build more realistic training environments for apps. Mercor also argues that there will continue to be a growing market for humans to train AI, particularly in high-stakes, complicated situations like legal cases.

The startup swung to a small operating profit last year, of $9 million, but sees that leaping to $226 million this year and $1.7 billion next. It forecast that its operating margin will rise from 3% last year to 12% this year and 26% next year, eventually climbing to 45% in 2030. Those forecasts would put it closer to best-in-class software stocks on this basis. Palantir had an operating margin of 46% in the first quarter.

The Information : Meta’s AI Incubator Is Developing an OpenRouter Rival to Cut C

Meta’s AI Incubator Is Developing an OpenRouter Rival to Cut Coding Costs

The Takeaway
  • Meta’s new AAI Labs incubator is developing an OpenRouter rival called Switchboard
  • Switchboard is among 200 early-stage projects at AAI Labs
  • Router would send some AI tasks to cheaper models to reduce inference costs

Meta Platforms’ internal incubator for AI-powered products and tools is developing a version of the OpenRouter service that would help cut costs by sending some AI tasks to lower-cost models.

The incubator, called AAI Labs, is part of Meta’s Applied AI Engineering team, which Meta set up in March and allows employees to pitch AI-powered products and services for internal use—and possibly later release them to the public. Once a proposal is approved, a small team is assembled to build and potentially launch it, according to internal documents reviewed by The Information.

A July memo says AAI Labs has about 200 approved projects spanning consumer products, developer tools and internal infrastructure.

The AI model router, dubbed Switchboard, is among those projects. It would determine which models should handle each request from a human user or AI agent by scoring tasks by difficulty. It would send simpler requests to smaller, cheaper models, similar to the way that OpenRouter’s Auto Router product works, according to one of the documents.

As with many projects inside AAI Labs, Switchboard is an early-stage effort and may never be launched as a product, according to a person familiar with the matter. But the Meta team working on the project said in the document outlining the project proposal that the company could use Switchboard internally to lower costs, and release it publicly to organizations running AI coding agents at scale, the document shows.

Projects developed under AAI Labs reflect Meta’s appetite for turning its enormous AI investment into potential new tools, businesses and revenue streams beyond advertising. The company has projected its spending on AI infrastructure and other equipment and facilities could hit $145 billion this year, more than double the amount in 2025, and it has been reorganizing its engineering teams to strengthen AI development.

The AAI Labs projects also show how Meta is turning to employees for this effort, to quickly prototype AI-powered products that can either improve Meta’s internal operations or become standalone products released to the public.

Meta also has been looking for ways to rein in the billions of dollars it is spending on AI tools for its coders and other employees. As The Information previously reported, the company told employees in June that it would begin imposing limits on AI token usage just weeks after encouraging broader adoption of AI tools across the company, while also building an internal platform to track AI spending and enforce token budgets.

The Value of AI Routers

OpenRouter has gained popularity among developers looking to access various AI models while trying to reduce costs. The Information last week reported that the company has held discussions about a potential acquisition by a bigger technology company—a deal that could boost OpenRouter’s valuation by billions of dollars. In April, it was valued at $1.3 billion valuation.

Model routing gained broader attention last year when OpenAI released GPT-5, which included a router that automatically switches to a cheaper model when a user’s prompt is relatively less complex. Other companies, including Databricks and Palantir, have developed their own router tools to help manage costs and improve efficiency.

One of the internal Meta documents describes the problem that the company’s engineers hope to address through Switchboard: “We pay top-model prices for every coding request, including the easy ones.” Most coding-agent tasks can be handled by smaller models, while only a minority require the capabilities of more expensive frontier models, according to the project proposal rationale outlined in the document. “Today everything goes to one model, so we overpay on easy work or underperform on hard work,” the document says.

The document states that inference costs are the primary barrier to deploying agents more broadly across the company. “Cost is what limits how widely we can run agents,” the document says.

Meta declined to comment.

Among the other projects under development at AAI Labs is an AI-powered tour guide app for drivers that would run through Apple CarPlay and Android Auto. It envisions using AI to narrate nearby landmarks and to allow drivers to ask questions about those points of interest, according to a separate internal document outlining the plans. The document positions the product as an extension of Instagram’s Map experience that could eventually incorporate location-based Reels and travel recommendations and perhaps later integrate with Meta’s Ray-Ban smart glasses. Meta could release the app publicly after testing it among employees first, according to the document.

The formation of AAI Labs aligns with CEO Mark Zuckerberg’s broader vision that AI will enable smaller teams to build products more quickly. In April, he told analysts that AI agents mean “small groups of people and teams can make very rapid progress” and predicted the technology would drive “a lot of innovation.” Zuckerberg also has said that Meta could build as many as 50 new apps.