Project Stargate Likely Be Start of "Massive" AI Investments in US: Analysts

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Project Stargate Likely Be Start of "Massive" AI Investments in US: Analysts

Seeking Alpha01-22 21:36

The announcement of Project Stargate by President Trump is likely to usher in an era of "massive" artificial intelligence investments in the U.S., though the broader implications may not be known for ...

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The initiative could reach $500B over the next four years, the companies said.Initially, 10 data centers will be built in Abilene, with plans to expand to 20 over time, Oracle co-founder Larry Ellison said at the event.Aside from the aforementioned quartet, Arm, Nvidia and Microsoft were also named as key partners in the project. Microsoft is also one of OpenAI's largest investors.Financial details, implicationsDetails of the financial breakdown for the partnership are not yet clear, though Macquarie analyst Paul Golding said SoftBank had $24.5B, as of its most recent quarterly disclosure.Regardless of how much money SoftBank puts in, its involvement in the project should show investors \"how valuable\" the quality and combination of its assets and tech investment management capabilities are, Golding added.The partnership may be a \"possible positive\" for Oracle, Bank of America analyst Brad Sills yet, though the fact few details were shared about the partnership is an initial concern.\"Oracle would share in the P&L of an AI growth business, and potentially gain some scale and operational learning in its SaaS and cloud infrastructure lines of business,\" Sills wrote in a note to clients. \"However, with our FY25e for Oracle’s capital expenditures reaching $13.9 billion (+103%), against FY25e cloud revenue of $24.7 billion (+25%), we believe we are entering a period where negative margin leverage is likely to occur near term.\"While some may see the involvement of Oracle as a loss for Microsoft, Sills said it has \"little impact\" on the partnership with OpenAI. Sills has a Buy rating and $510 price target on Microsoft.Following the announcement, Microsoft said in a blog post that the key terms of the OpenAI partnership are unchanged, notably exclusive its access to OpenAI's APIs. OpenAI said it will continue to increase its usage of Microsoft Azure due to the project.Additionally, Microsoft now has the right of first refusal on cloud capacity, something Sills said was important to note, as the Windows maker \"derives strategic value to running certain types of OpenAI workloads on Azure, such as training for frontier models like GPT-4.\"And like the financial breakdown, the wider implications of the joint venture will not be known for some time. However, Bank of America analyst Justin Post said the possibility remains it could result in more competition for Amazon and Google (GOOG) (GOOGL) for AI workloads.\"Stargate [is] likely well positioned to power US Government AI usage (healthcare was cited as a target vertical) and possibly competing vs. AWS for other AI workloads,\" Post suggested in a note to clients.\"Near-term, we think Stargate will likely be active building infrastructure and data centers (incl. buying GPUs), and other areas of long-term investment could include chip manufacturing, components manufacturing (packaging, memory, integrators), networking infrastructure, and energy production & power grid management.\"","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"hasMoreComments":false,"newsSizeData":{"likeSize":8,"commentSize":0,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false}}