Investing.com -- US President Donald Trump announced on Tuesday a private sector investment of up to $500 billion aimed at building infrastructure for artificial intelligence (AI), as part of efforts to stay ahead of global competitors in this key technology sector.
Trump revealed that OpenAI, SoftBank (TYO:9984) Group (SBG), and Oracle (NYSE:ORCL) are partnering on a joint venture (JV) called Stargate, which he said will develop data centers and generate over 100,000 jobs across the US.
The companies, along with other investors backing Stargate, have committed an initial $100 billion for immediate use, with the remainder to be invested over the next four years.
SoftBank CEO Masayoshi Son, OpenAI CEO Sam Altman, and Oracle Chairman Larry Ellison were present at the White House launch event. Ellison shared details at the press conference, stating that construction has already begun on the first data centers in Texas.
“Twenty will be built, half a million square feet each,” Ellison said. He also noted the project’s potential to support AI applications, such as analyzing electronic health records to assist doctors in providing better patient care.
In March 2024, The Information reported that OpenAI and Microsoft (NASDAQ:MSFT) were exploring plans for a $100 billion data center initiative, also named "Stargate," with an AI supercomputer expected to debut in 2028.
Massive data centers, packed with thousands of energy-intensive computer chips, are crucial for powering AI systems like those behind ChatGPT. However, the rapid expansion of such facilities is putting pressure on power grids in several US states.
Tech giants like Microsoft, Alphabet Inc Class A (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), and Meta Platforms (NASDAQ:META) have already invested billions in building new data centers. Despite this, AI leaders, including Sam Altman, emphasize the need for even more facilities to support the continued progress of AI technology.
Altman said he thinks “this will be the most important project of this era, for artificial general intelligence (AGI) to get built here”.
Analysts comment on the Stargate joint venture
Bank of America: “The JV could have implications for our Internet coverage universe, with Stargate likely well positioned to power US Government AI usage and possibly competing vs. Amazon Web Services for other AI workloads. Near-term, we think Stargate will likely be active building infrastructure and data centers, and other areas of long-term investment could include chip manufacturing, components manufacturing, networking infrastructure, and energy production & power grid management.”
Wolfe Research: “We see Stargate positively for MSFT and ORCL.”
“This is a clear narrative affirmation for ORCL as it supports the AI winner narrative and accelerating growth at scale. As a reminder, ORCL spent ~$7B in capex in FY24 and expects that to more than double in FY25.”
Macquarie: “While funding considerations and operational bandwidth for SBG will be key areas to watch as Stargate gets up-and-running, participation in a project of this scale alongside heavyweights in the AI space like OpenAI, in our view shows how valuable the quality and combination of SBG’s assets and tech investment management capabilities are seen to be, given the time and place in tech and the world.”
Bernstein: “The incoming administration is more supportive of a rapid AI build out than the last one. The sheer size of investment by a single entity is massive. The AI build out can more than offset the headwinds to electricity demand from the repeal of the EV tax credit. Our electrical infrastructure names (PWR, ETN, HUBB) are the biggest winners.”
Wedbush: “We believe this is the start of a wave of massive AI investments to take place in the US as we expect more big tech players to make announcements over the coming weeks.”
“As Project Stargate takes hold this is bullish for the likes of Palantir (NASDAQ:PLTR), Microsoft, Oracle, Dell (NYSE:DELL), Amazon, Google, and a host of other players.”