This will lead to a planned $500 billion AI infrastructure investment.
Among the biggest market drivers over the past few years has been the development of the artificial intelligence (AI) industry. Simply put, AI’s advanced algorithms can be deployed to streamline and automate many time-consuming tasks, freeing up people for higher-level work. As a result, many believe that generative AI will spark a wave of productivity growth and create windfall benefits for companies that make the most of this cutting-edge technology.
Earlier this week, President Donald Trump announced an initiative called Project Stargate. He said this would be the “largest AI infrastructure project in history.” The private joint venture will initially be funded by SoftBank, Openai, Oracle, and AI-focused investment fund MGX and “intends to invest $500 billion in building AI infrastructure over the next four years,” according to a press release. is”. The initiative plans to build up to 20 massive data centers across the country designed to meet the processing power needs of AI systems.
The announcement also revealed the identities of several companies that will be tapped to provide the necessary technology. Let’s take a look at three that stand to benefit from this considerable infrastructure investment.
Image source: Getty Images.
1. nvidia
No surprise to Nvidia (NVDA -3.12%)) Selected as one of Project Stargate’s “Key Initial Technology Partners.” The company pioneered the graphics processing unit (GPU), which has become the go-to provider for the specific type of computing horsepower that AI requires.
Nvidia GPUs are the gold standard for AI processing. Most of that happens in data centers. As a result, the company dominates its niche with 98% of the market in 2023, similar to its market share in 2022. Data center GPU market share.
There was concern among some investors that Nvidia’s growth may have peaked, but the scope of the Stargate Project helps explain the long runway ahead of it. In fact, Melius research analyst Ben Reitz speculates that it could be Project Stargate’s biggest single beneficiary.
Trading on next year’s expected earnings of just 33, Nvidia is attractively priced in light of its ongoing opportunities.
2. Microsoft
Openai, the creator of ChatGpt, has a long-standing relationship with Microsoft (msft -0.59%))so it makes sense for the company to be tapped as a supplier. The press release says the initiative “builds on our existing Openai partnership with Microsoft” and continues to “increase Azure consumption” of Microsoft’s Cloud Infrastructure Service.
Microsoft has made it clear that the demand for AI is driving cloud growth. CEO Satya Nadella said that in the first quarter of fiscal 2025 (ended September 30), Azure Cloud’s distribution from rivals grew 34% year over year compared to the industry’s 24% growth rate. I did. Nadella also noted that 12 percentage points of that growth was a result of demand for AI-related services. Perhaps more importantly, he noted that “demand is higher than available capacity.”
The company is already taking steps to address that imbalance. In a blog post earlier this month, Microsoft Vice Chairman and President Brad Smith said the company is investing $80 billion in data centers “to train AI models and deploy AI and cloud-based applications around the world.” He said he is on track to invest.
The company was fast out of the blocks to provide AI solutions and had a head start that is now paying off. The combination of relentless demand for AI and Microsoft’s leadership position in this space suggests that the best is likely yet to come.
Microsoft stock is currently trading next year’s expected earnings 34 times. This is a reasonable valuation given its place in the AI ecosystem.
3. possession of the arm
arm holdings (arm -2.43%)) You can also benefit a lot from the Stargate project. This is largely thanks to its close relationship with Nvidia and its contributions with AI-centric chips. “It’s a big, big deal,” CEO Rene Haas said in an interview this week.
Nvidia has started shipping new Blackwell processors, but a look at its previous cutting-edge Grace Hopper GH200 SuperChip helps provide some context. GH200 combines CPU and GPU technology from the same processor to meet the demanding demands of AI. It incorporates two GRACE CPUs, each containing 72 ARM V9 cores, for a total of 144 CPU cores included in each chip. Reports suggest Blackwell The platform includes the same number of these high-end cores and is suitable for arms.
In an interview last year, CEO Rene Haas pointed out that many of ARM’s customers are moving to V9 and using more of these cores per device. This is important because V9’s royalty rate is double that of its predecessor. This suggests that ARM’s sales growth will continue to accelerate.
ARM’s rapid growth has been accompanied by a commensurate increase in its valuation, although most commonly used metrics are lacking in valuing high-growth stocks. Using a more reasonable price/earnings and growth (PEG) ratio, ARM has a valuation clock of 0.24. Inventories with a positive number less than 1 for that metric are generally considered to be undervalued.
Danny Bena has held positions at Microsoft and Nvidia. Motley’s Fools has posted and recommended positions at Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: January 2026 long-term $395 phone at Microsoft and January 2026 short-term $405 phone at Microsoft. Motley’s Fools has a disclosure policy.
