President Donald Trump’s dive into Stargate could potentially give a significant boost to certain tech companies, as seen by Wall Street evaluations. The newly announced $500 billion collaboration between OpenAI, Oracle, and SoftBank is set to enhance AI infrastructure in the United States. In response, Oracle and Microsoft shares have seen a notable uptick of around 15% and 3%, respectively, since the beginning of the week, with Microsoft being an investor in OpenAI.
On Wall Street, this development is viewed favorably for the tech industry. Citi’s Tyler Radke highlights that it could encourage strong capital investments by increasing the need for more advanced inference and training capabilities. Additionally, the project demands higher computing power and electricity usage, which might drive further investments in grid infrastructure and power transmission, as per UBS’s Solita Marcelli.
From Goldman Sachs, analyst Kash Rangan identifies Oracle and Microsoft as chief beneficiaries due to the government’s focus on AI. Rangan suggests that in the near term, Microsoft is likely to come out ahead, thanks to its solid financial standing and capital expenditure plans targeting 2025. Oracle might experience benefits later due to the “lead time commitment” of two to three years needed for running AI data centers.
Derrick Wood from TD Cowen predicts that this venture will lead Oracle towards more capital investment in AI, benefiting from shifting some OpenAI training workloads away from Microsoft. This shift is expected to create a new backlog for Oracle, boosting its cloud infrastructure revenue at a growth rate exceeding 50% annually through 2027. For Microsoft, offloading certain OpenAI workloads allows it to optimize the use of graphics processing units for inference, thus improving the efficiency of capital expenditures. Wood notes that these factors should help Microsoft ease supply issues, increase revenue-generating AI capacity, and steer Azure’s growth back to around 30%.
It’s not just Microsoft and Oracle that stand to gain from the Stargate project. James Fish of Piper Sandler points out Arista Networks as another potential beneficiary due to its connections with Oracle, Microsoft, and OpenAI, coupled with its strong ethernet switching portfolio. With switching accounting for more than half of networking spend and Arista holding over 30% of the high-end data center switching market, this could open up a $6 billion market over five years, Fish suggests. He also sees Pure Storage as an underrated opportunity for investment in Stargate’s storage capacity needs, predicting a $10 billion market potential.
