Stargate

President Donald Trump had a busy first week back in the Oval Office. He was decidedly vague on the topic of universal tariffs, which sent the U.S. dollar down by the largest weekly margin since November 2023. But he was much clearer about his ambitions for AI: on his second day, he announced the Stargate Project – or as he puts it, ‘the largest AI infrastructure project in history.’

Stargate is a joint venture between SoftBank, OpenAI, Oracle ($ORCL) and Emirati investment firm MGX. It gets its name from the 1994 science fiction movie Stargate, in which stargates were portals to other worlds. The project will focus on building AI infrastructure for OpenAI, whose flagship product ChatGPT does feel like an other-wordly portal in some ways. 

The venture was funded with an initial investment of US$100b and is expected to reach US$500b by 2027. ‘They don’t actually have the funds,’ said Tesla ($TSLA) CEO Elon Musk on X, throwing shade at the Trump-endorsed project. ‘Wrong, as you surely know,’ responded OpenAI CEO Sam Altman, inviting Musk to view the first site already underway.

Apparently, it's been underway since 2022. Construction is ongoing for ten data centers in Texas, each spanning 500,000 square feet, and plans for ten more have been mapped out. It will demand a lot from the state’s power grid, already serving some of the largest names in crypto mining. Potentially, that means firms involved in energy infrastructure will have it good over the next few years.

Of course, much of the attention was on Stargate’s key technology partners: Oracle, Nvidia ($NVDA), Microsoft ($MSFT) and Arm ($ARM). Shares in all the tech firms rallied on Wednesday 22, and Arm made the biggest gain, ending the day 16% higher. But then they were all hit hard after Chinese AI startup DeepSeek climbed to the top of the Apple ($AAPL) App Store: its ‘breakthrough’ release last week now threatens to undermine big tech’s major investments in AI. Share prices dropped dramatically for Nvidia, Broadcom ($AVGO), TSMC ($TSM), Microsoft and Alphabet ($GOOGL), which lost a collective US$1.1 trillion in a single day. Trump dubbed DeepSeek a ‘wake-up call’ for U.S. firms.

Still, the spotlight is likely to stay on these firms. A project of Stargate's nature likely means Nvidia’s GPUs, Arm’s CPUs, and Microsoft's and Oracle’s cloud computing units will be in high demand. If nothing else, it's a sign of more potential revenue for these firms.

And revenue growth is fundamental to boosting earnings per share. There’s already a fair number of people raising eyebrows at U.S. company valuations, including JPMorgan ($JPM) CEO Jamie Dimon. The best way to justify share prices will be for companies to show profits are still climbing. We'll see if that's the case when their earnings reports come out this week.