Stargate: The new Frontier for AI & what this means for the market
Deep Analysis into what Stargate means for the AI & Technology market
I thought today I would do a deep analysis into the new $500 billion dollar AI infrastructure investment project known as Stargate that US president Donald Trump recently announced and find out specifically how this will effect the companies operating in the market.
Firstly, I think it is important to understand what exactly is Stargate. Well it started when Donald Trump announced Stargate while standing next to three of the most prominent men in the Tech industry, OpenAI CEO Sam Altman, Oracle founder Larry Ellison and Softbank chair Masayoshi Son.
OpenAI is a US artificial intelligence research organisation. It’s the developer of ChatGPT. They will oversee the majority of the operations while also leveraging their already established cloud partnerships such as Microsoft Azure.
Oracle is one of the US’s biggest data centre operators. They will be supplying database software, and providing cloud computing services.
SoftBank is a Japanese multinational investment holding company that is best known for investing in technology-focused companies and start ups. They will take charge of the financial management of the project.
MGX is a United Arab Emirates-based investment firm focusing on AI and advanced technology.
The U.S. government will not act as an investor itself but will help secure the necessary permits and expedite the construction process. The companies just listed as well as other equity backers and the technology arm of the UAE’s sovereign wealth fund have committed to invest $500 billion over the next four years, with $100 billion being invested in the first year. This will require the Stargate project to build data centres that will be needed for the development of AI projects in the US and create more than 100,000 jobs in the United States, more on how this will effect tech companies below.
The building of these new data centres across the United states is already underway, with other potential building locations being scouted out, the first ten data centres are being built in Abilene, Texas, which was chosen as it has affordable energy and vast land masses available for building. The Cloud AI company known as Crusoe, along with alternative asset manager Blue Owl Capital and data centre advisory and investor firm Primary Digital, helped build this first data centre on land owned by Lancium, who are a Texas based technology and infrastructure company that help build the worlds largest data centres. These colossal data centres will hold thousands of computers & computer chips, as well as other hardware to help train up the AI systems.
So what is Stargate aiming to help with? Well, during the press conference Ellison pointed out that it will be able to help out the healthcare system, specially that the tools provided by OpenAI and Softbank are helping to develop a cancer vaccine. Ellison was quoted saying.
“You can do early cancer detection with a blood test, and, using AI to look at the blood test, you can find the cancer that is seriously threatening the person," Ellison said. "Once we gene sequence that gene tumour, you can vaccinate the person against that cancer, and you can make that mRNA vaccine robotically using AI within 48 hours.”
Now it's worth taking a quick look at the policy changes that Trump announced on his first day in office, as this will ultimately affect the AI tech market moving forward. Trump revoked orders that regulated the development of AI previously, now Stargate and other US-based AI projects will no longer be subject to national development guidelines, effectively removing red-tape that will slow this & other AI projects down through the pipelines, although states may still impose restrictions. Steve DelBlanco, CEO of NetChoice had this to say about the policy changes.
“By repealing Biden’s restrictive rules on energy production and AI development, the president is steering America to remain dominant in creating the best technology in the world,”
One last element to note is that a week after the announcement of Stargate. China announced DeepSeek which is it's own low-cost, ‘low’-chip and open-source AI model that ushered in market chaos, after it became clear it posed a challenge to a US-based OpenAI rival, o3. Leading chipmaker NVIDIA lost $600 billion of market value when the markets opened on the 27th of January. This truly shows that the worlds most powerful countries are trying to be the first to conquer the new frontier of AI, and are willing to throw obscene amounts of money at it to make it happen.
Now that we've looked at what exactly Stargate is, who are the major players and what policy changes have happened because of it we will move onto what this looks like for the investing landscape into AI & technology going forward.
So what exactly does this mean for the future of the AI market? Well straight away it is noticeable that NVIDIA's largest competitor AMD is missing from the companies chosen to implement this, looking at this through an investor’s lens, this shows how dominate Nvidia is as the primary chip supplier for AI systems. OpenAI is a privately operated company and thus not publicly traded, however Oracle, Softbank, NVIDIA & Microsoft are all publicly traded companies who will be playing a major part over the next 5 years to implement Stargate.
NVIDIA computer chips will be in high demand and performing much of the grunt work in the engine rooms of these new data centres, revenue should increase significantly if they can stay ahead of the pack when it comes to supplying chips for AI systems. With NVIDIA's new AI technology such as Blackwell & the Cosmos platform, they are pushing the AI frontier further & further along. Countries like Taiwan and South Korea who house the largest chip manufacturing companies known as Taiwan Semiconductor Manufacturing Company (TSMC) and SK Hynix will also reap the benefits of the increased chip production.
Microsoft's role will largely be based in supplying it's cloud computing service known as Microsoft Azure. I do not believe they will benefit as much as NVIDIA will although Microsoft may look to expand it's own investments into AI. In 2019, Microsoft invested its first $1 billion in OpenAI and as of late last year, its total funding commitment was $13 billion. Microsoft has also incorporated OpenAI's technology into its own products.
Oracle is an interesting case when it comes to Stargate as they are another infrastructure provider like Microsft Azure, as in they are both competitors in the cloud computing market. OpenAI's primary cloud platform is Microsoft Azure not Oracle OCI (Oracle Cloud Infrastructure). This begs the question is Oracle going to provide the infrastructure layer of the remaining $400 billion that will come in the years following. The only way I see this making sense is that Oracle are trying to become a major partner with OpenAI the same as Microsoft are now currently and to get OpenAI running on OCI. Perhaps Oracle is offering them discounted prices to help acquire more market share. This will hopefully become more clear in the future. It is worth noting that Oracle reported strong Q1 results of a 45% increase in cloud infrastructure revenue which boosted their stock price up by around 9%, this shows at a high level that their cloud infrastructure arm is performing well.
Lastly looking at what role Softbank will play, Softbank have been trying to break into the AI market for some time now, an opportunity has presented itself for them and their diving in with a $40B primary investment followed with a $300B post-money valuation for OpenAI, over the next 12 to 24 months. Softbank is essentially taking care of the financial management side of the project. Both Softbank & Oracle will each have 40% ownership of Stargate. Depending on how Stargate performs in the future, Softbank could see the profits hit their bottom line years down the track.
To conclude, I believe all the major companies involved in Stargate are set to see increases in revenue 3-5 years down the track once they hit their bottom line. Chip manufacturer companies such as the previously mentioned Taiwan Semiconductor Manufacturing Company (TSMC) and SK Hynix will see increase in demand as well as companies such as Lancium & Crusoe who help with the construction of these massive data centres will also see the benefits that Stargate will bring to the market in the future and could be worth looking further into.
Thank you for reading.
Stuart G