Beyond Oracle and Nvidia: Stocks and Sectors Set to Benefit from the Stargate AI Venture
A New Era of AI Infrastructure Investment
As part of President Trump’s announcement of the ambitious $500 billion Stargate joint venture focusing on artificial intelligence infrastructure, major players such as Oracle Corp. (ORCL), Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), and SoftBank Group Corp. (JP:9984) have been identified as key beneficiaries. Their stocks experienced an uptick on the news, showcasing the excitement around the prospective growth in the AI sector. However, the Stargate initiative could also provide opportunities for several less-obvious stocks across various sectors that are also expected to benefit from increased government support for AI-driven infrastructure.
Sean Farney, a vice president of data-center strategy at real-estate firm JLL, emphasized the significance of the financial commitment, indicating that it focuses on growing technology that holds strategic value. As stakeholders in the industry get ready for this new stage of AI buildout, investors should keep a close watch on some of the sectors and stocks that stand to gain from this landmark initiative.
Optical-Networking Companies
The announcement sparked notable gains among networking stocks, including Arista Networks Inc. (ANET) which surged 6.9% and Ciena Corp. (CIEN) which rose by 7.0%. Arista’s established relationship with Microsoft, a key player in the Stargate venture, positions it favorably to capitalize on the initiative. Jefferies analyst George Notter notes that Arista’s $1.5 billion targeted AI-data-center sales figure now appears conservative in light of the anticipated catalysts.
Ciena, which supplies products to both Microsoft and Oracle, could also play a pivotal role as the Stargate venture propels the creation of geographically diverse data centers. Notter highlighted their wavelength-division-multiplexing technology as a solution for connecting these new facilities. Furthermore, he identified Coherent Corp. (COHR), Lumentum Holdings Inc. (LITE), Fabrinet (FN), and Corning Inc. (GLW) as additional beneficiaries. The first three companies develop transceiver sockets likely integral to the Stargate venture, while Corning focuses on producing essential fiber connectivity products.
Data-Center Infrastructure Plays
The U.S. currently houses approximately half of the established data-center capacity worldwide, but there is an ongoing global race to scale up this infrastructure. Forecasts suggest that the global data-center capacity will grow by 15% annually for the next few years. Against this backdrop, Vertiv Holdings LLC (VRT) emerged as one of last year’s hottest stocks, experiencing a 3.8% increase recently. The company is recognized for its advanced technologies designed to keep data centers cool, particularly regarding high-temperature GPU (Graphics Processing Unit) operations, which will be crucial for AI applications.
Schneider Electric SE (FR:SU) also gained traction due to its energy-management solutions, registering nearly a 2% rise on Wednesday. Both companies exemplify the ongoing trend within data infrastructure, driven by heightened demand for efficient operations.
Data-Center REITs
Despite experiencing slight declines on Wednesday, shares of Digital Realty Trust Inc. (DLR) and Equinix Inc. (EQIX) had shown robust performance in anticipation of the announcement. UBS analyst John Hodulik remarked that the generative AI boom has significantly impacted the demand-supply dynamic in favor of data-center operators. This is underscored by the projection that spending among the top ten data-center companies—including tech giants like Amazon (AMZN), Meta Platforms Inc. (META), Alphabet Inc. (GOOGL), and Apple Inc. (AAPL)—is expected to rise from around $200 billion annually to $300 billion.
Memory Suppliers and Their Role
With the attention focused on the infrastructure side, it’s also imperative to highlight the importance of memory supply in the AI data ecosystem. Analysts from William Blair anticipate that Micron Technology Inc. (MU) and SK Hynix Inc. (KR:000660) could flourish due to their roles in addressing key memory bottlenecks in AI data centers, especially for inference use cases. They also recognized Astera Labs Inc. (ALAB), a maker of memory retimers utilized in Nvidia servers, as a potential key player in this expanding landscape.
The collective buildout of the Stargate data centers is expected not just to elevate demand for chips and servers but also for essential utilities, including energy and cooling solutions, which are paramount for operational efficiency.
The Energy Sector’s Critical Role
Recent large-scale data center announcements have underscored the increasing need for energy resources. Patrick Wilson, a portfolio manager for CenterSquare Investment Management, emphasizes that energy will be a critical gating factor in the ambitious plans laid out by the Stargate initiative. He points out that the share of the U.S. power grid consumed by data centers has risen from 3% five years ago to an anticipated 10% or more by 2023, with figures even predicting up to 13%.
Natural gas capabilities and renewable energy sources may help meet this energy demand. However, discussions in the energy sector are increasingly revolving around the potential resurgence of nuclear energy, although such solutions may take a decade or more to implement.
Conclusion
The Stargate AI venture promises to be a game-changer, not just for the tech giants directly involved, but for a broader range of stocks across multiple sectors. From networking companies to data-center infrastructure plays, the ripple effects of this historic investment are likely to shape the domestic AI landscape significantly. As the AI ecosystem continues to develop, identifying and investing in these allied sectors will be critical for those looking to capitalize on the future growth that Stargate presents.