
One of the biggest "new" things to come out of the Trump White House so far is yesterday's splashy announcement of "Stargate." It has sent shares of Oracle up 13% in fewer than 24 hours. It has analysts in almost every sector talking about the impact it could have on the stocks they cover.
But what is it, exactly? A juiced-up version--without using any taxpayer dollars, as far as I can tell--of a massive supercomputer project that was already underway. Specifically, it's a joint venture between Oracle, OpenAI (which is privately held), and Japan's Softbank to invest a combined $100 billion in a new U.S. company, and "up to $500 billion" over the next four years.
What is this company going to do? Its first project will be the buildout of data centers, ten of which are already planned in Abilene, Texas, and whose construction is already underway, according to Oracle co-founder Larry Ellison. That could benefit Texas-exposed concrete and material names like CRH, Cemex, and Holcim, according to RBC--although they only have 3-4% total revenue exposure, and their shares are up just fractionally today.
The much bigger moves are in the chip and tech stocks. The name "Stargate" refers to an AI supercomputer that these new data centers will support, which, according to The Information (which first reported this back in March), could cost over $100 billion and take five to six years to complete--making it potentially 100 times more expensive than the ones we're currently using. UBS thinks it could end up having "well over a million" GPUs.
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The biggest beneficiaries today are shareholders of Arm Holdings--which will be one of the "key initial technology partners," along with NVIDIA and Microsoft. Arm shares are surging 16% today and a whopping 45% since Jan. 1. Arm is also still majority owned by Softbank, whose CEO, Masayoshi Son, will be chairman of the new company. Masa Son, if you recall, previewed this announcement with Trump last month. He has promised to create 100,000 U.S. jobs; he has certainly created billions in market cap.
Stargate's power needs, by the way, could be massive and even require nuclear-scale support. "We anticipate further developments in permitting reform and federal investment...particularly in nuclear energy," to fuel this buildout, Ed Mills of Raymond James wrote today.
Intriguingly, this project was initially reported as a joint venture between close partners OpenAI and Microsoft. And yet, one surprise out of yesterday's announcement is not only that many more companies and even foreign financiers will be involved (such as Middle East AI fund MGX), but that Microsoft is now actually losing its status as OpenAI's exclusive cloud provider.
Money Report
Wells Fargo analyst Michael Turrin isn't concerned. Microsoft, he notes, will now have the right of first refusal on all new OpenAI compute, "benefitting both parties, in our view," he wrote. Sure enough, Microsoft shares are up 3% today. The company can now take "only the highest-margin or most-consistent compute," lower some of its capital expenditures, and diversify its revenue base, he pointed out.
So what we seem to have here, in other words, is the president marshalling eager tech CEOs who will directly benefit from this work to scale up their investment plans for a massive supercomputer that will help the U.S. keep its edge in the AI technology race. As our Deirdre Bosa has reported, this comes as many in the tech world are concerned by the breakout success of China's "DeepSeek," which has reportedly built a competitive AI model in just two months for less than $6 million using inexpensive GPUs.
It's also a stark contrast to the Biden administration, whose Infrastructure Investment and Jobs Act cost $550 billion of taxpayer dollars. This is essentially Trump's private-sector version, which as RBC noted is actually somewhat smaller than they had hoped. (And hence why the materials stocks aren't huge movers today.) It's still bullish, Macquarie notes, for the power infrastructure stocks--and in fact brings that sector, long seen as more of a Democratic policy beneficiary, into Republicans' orbit as well.
All of which is to say, Stargate also seems to giving us a glimpse into the quickly-arriving future of the U.S. economy.
See you at 1 p.m!
Kelly
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