"Stargate" Project Sparks Stock Surge, But Where’s the $500 Billion Coming From?
Shearing sheep
January 23, 2025
GoGPT Summarizes Articles
On January 21st, Trump unveiled the $500 billion “Stargate” initiative, a collaboration with OpenAI, SoftBank, and Oracle designed to revolutionize U.S. AI infrastructure. The announcement sent Wall Street into a frenzy, with stocks tied to the project skyrocketing.
Analysts are optimistic, with some suggesting that “Stargate” could mark the dawn of a new era for massive AI investments in the U.S. Wedbush Securities analysts have gone so far as to predict that other tech companies could pour up to $1 trillion into AI over the next few years.
The project, which also includes major tech partners like Microsoft, ARM, and NVIDIA, and the Middle Eastern AI fund MGX will invest alongside SoftBank, is focused on expanding data center infrastructure to drive the AI revolution.
Shares of companies linked to “Stargate” have surged: Arm Holdings ($ARM) is up nearly 16%, Oklo Inc ($OKLO) jumped over 9%, and Oracle ($ORCL) gained almost 7%. Both Microsoft ($MSFT) and NVIDIA ($NVDA) saw gains above 4%.
Despite the excitement, Macquarie analyst Paul Golding pointed out that the financial details of the partnerships remain unclear. However, SoftBank recently reported having $24.5 billion in liquid assets. Regardless of how much it invests, its involvement in the project will demonstrate the firm’s management skills and the value of its asset portfolio.
Bank of America analyst Brad Sills believes Oracle’s involvement could be positive but cautioned that the lack of details leaves uncertainty. He noted that Oracle will share in the profits and losses from the AI business and may gain scale and operational experience in SaaS and cloud infrastructure. However, with Oracle’s 2025 fiscal year capital expenditures projected at $13.9 billion (up 103%) and cloud revenue expected to grow by 25%, this could soon put pressure on profitability.
While some may see Oracle’s involvement as a negative for Microsoft, Sills argued that it won’t significantly affect Microsoft’s ongoing collaboration with OpenAI. After the Stargate project’s announcement, Microsoft confirmed that the terms of its partnership with OpenAI, particularly exclusive access to OpenAI’s API, remain unchanged.
In fact, Microsoft may end up as one of the biggest winners here. Despite only contributing $750 million to OpenAI’s latest $6.6 billion funding round, Microsoft has secured a share of future profits from OpenAI’s models without bearing the financial risk of the Stargate project. By leveraging OpenAI’s technology, Microsoft avoids the financial burden of funding the full-scale infrastructure while still benefiting from the innovations developed through Stargate.
Bank of America analyst Justin Post noted that the Stargate project could intensify competition in the AI space, especially with Amazon ($AMZN) and Alphabet ($GOOGL) in the race for AI workloads. He commented, “The Stargate project is likely to be advantageous in promoting the use of AI by the USA government and may compete with AWS in other AI workloads.”
Despite all the excitement, one major question still looms: Where is the $500 billion going to come from?
As I pointed out in my last post, both Elon Musk and Anthropic CEO Dario Amodei have questioned the feasibility of raising such a massive sum. Musk even claimed that SoftBank would struggle to raise $10 billion for the project. So, how will the $500 billion be funded, and how much has already been raised?
TMT investor Gavin Baker also criticized the $500 billion figure, calling it a “ridiculous number,” unless SoftBank decides to sell off its entire stakes in Alibaba and ARM. Baker highlighted in a tweet: “SoftBank has $38b in cash, $142b in debt and generates $3ish billion in FCF per BBG. They own $143b in ARM and $18b in BABA. If they start selling ARM, their stake will be worth much less very quickly.
Oracle has $11b in cash, $88b in debt and generates $10b in FCF. OpenAI is burning cash. MGX did not commit to a number and is a $100b fund. Maybe 10% of the fund goes into this best case.”
Given that the initial funding for the Stargate project is set at $100 billion, with plans to ramp up to $500 billion over the next four years, we don’t need the full $500 billion right away. The immediate question is where the first $100 billion will come from.
According to sources familiar with the matter, the founding investors—SoftBank, OpenAI, Oracle, and the Abu Dhabi sovereign AI fund MGX—will contribute some of their own funds to the project. However, a significant portion of the initial $100 billion is likely to come from new, undisclosed investors.
One insider mentioned that the initial funds will come from equity and debt contributions from the founding partners and co-investors, with funds expected to be deployed immediately.
There’s also speculation that Microsoft, OpenAI’s strategic partner, could be involved. Sources suggest that Satya Nadella and Sam Altman have discussed plans to massively expand OpenAI’s computing capacity, with Microsoft potentially investing in OpenAI’s infrastructure projects, including Stargate.
However, Microsoft CEO Satya Nadella politely refuted these rumors in an interview, clarifying that Microsoft’s $80 billion capital expenditure budget for the year won’t be allocated to Stargate. “Look, all I know is, I'm good for my $80 billion.” Nadella said.
So, while the details are still murky, it seems like the first $100 billion is coming together. The real question now is how the rest of the funding will fall into place.
I will definitely continue to follow the developments, as this project could reshape the future of AI infrastructure in the U.S. and beyond. What do you think?
#$Arm Holdings plc American Depositary Shares(ARM)#$Oklo Inc.(OKLO)#$Oracle Corp(ORCL)#$Microsoft Corp(MSFT)#$Nvidia Corp(NVDA)#$Amazon.Com Inc(AMZN)#$Alphabet Inc. Class A Common Stock(GOOGL)