By Tae Kim
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Energy Unlock. Hi everyone. The prospects for a massive AI infrastructure buildout in 2025 are getting brighter and brighter.
In fact, it's already taking a starring role in the new White House. On Tuesday, President Trump and executives from OpenAI, Oracle, and SoftBank announced the creation of a new initiative called The Stargate Project. It intends to spend $500 billion over the next four years building new AI infrastructure in the U.S.
"We will deploy $100 billion immediately," OpenAI said in a blog post. "This infrastructure will secure American leadership in AI."
SoftBank, OpenAI, Oracle, and MGX, an investment vehicle backed by the United Arab Emirates, are the initial equity backers in Stargate.
While the hundred-billion-dollar investment figure has received much of the attention, I'd argue an off-the-cuff remark from Trump during the press conference could turn out to be more important and shouldn't be overlooked.
"I'm going to help a lot through emergency declarations," Trump said. "They have to produce a lot of electricity. We'll make it possible for them to get that production done very easily, at their own plants if they want, where they will build, at the AI plant, energy generation."
Energy access has been a bottleneck for AI. In November, a federal commission ruled that Amazon's plan to plug a data center directly into a nuclear reactor in Pennsylvania shouldn't go forward as proposed amid objections from utilities that the reactor should go through the traditional grid.
But Trump's comments suggest technology companies will have an ally. It likely means the government will now allow local off-grid electricity generation for AI data centers. Whether it's through nuclear energy or fossil fuel electricity plants, it means the AI infrastructure buildout can happen faster, enabling more capacity to build larger clusters of AI servers filled with Nvidia GPUs.
Wall Street believes the two key winners from the Stargate announcement may be Nvidia and Oracle.
"While investors have become increasingly concerned about peak compute demand, this should go a long way to quelling these concerns and potentially adding growth runway for Nvidia beyond 2026," UBS analyst Timothy Arcuri wrote Wednesday.
UBS conservatively estimates 40% of data center spend could go toward AI server racks, suggesting up to $200 billion could accrue to Nvidia.
The Stargate announcement "should further propel Oracle's position as an AI and specifically training vendor of choice," Bernstein analyst Mark Moerdler wrote Wednesday.
There was some skepticism about whether Stargate can achieve its investment goals, most notably from Elon Musk, who has a competing AI infrastructure company called xAI. But OpenAI's Sam Altman and Arm CEO Rene Haas have responded with confidence that they have significant financial backing for Stargate.
But even if the initiative falls short of the headline figures, it likely means tens of billions of dollars in incremental AI spending.
Stargate wasn't the only positive AI developments in recent days. TSMC CEO C.C. Wei said revenue from AI-related chips will double in 2025, citing "strong surging" demand.
On Tuesday, Anthropic CEO Dario Amodei told the Wall Street Journal, "The surge in demand we've seen over the last year, and particularly in the last three months, has overwhelmed our ability to provide the needed compute."
In November, I wrote in a Barron's feature story that Nvidia, Oracle, and Vertiv were best positioned to take advantage of the AI trend in 2025. With the flurry of news this month, I still believe that to be the case.
This Week in Barron's Tech
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-- Meta Stock Is a Top AI Pick, Analyst Says
-- Snowflake Stock Has Missed the Software Rally. Analyst Says to Buy.
Write to Tae Kim at tae.kim@barrons.com or follow him on X at @firstadopter.
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January 22, 2025 16:35 ET (21:35 GMT)
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