Project Stargate

Project Stargate was announced on January 21st, 2025. According to OpenAI, one of the partners in the project, Stargate aims to “invest $500 billion over the next four years building new AI infrastructure for OpenAI in the United States.”1 The newly created company will have its work cut out for it. Artificial Intelligence (AI) research appears to only be accelerating, with DeepSeek’s breakthrough, as my colleague Sonu Varghese wrote about, serving as the latest catalyst. Stargate’s scale though may prove to be unmatched and pave the way for knowledge creation to accelerate.

The Numbers

Details surrounding the seed investors in the new company have emerged. It appears that OpenAI will invest $19 billion immediately in the new company for a 40% ownership stake, with Softbank investing another $19 billion to control another 40% of the company. Softbank’s CEO Masayoshi Son is set to serve as chairman of Stargate. The remaining seed investments will mostly come from Oracle and MGX (an Abu Dhabi based sovereign wealth fund) in return for ownership interest in the company as well.

The Partners

In addition to the four investors named above, ARM, Microsoft and Nvidia will also serve as key technology partners. The combination of hardware (semiconductors from Nvidia and ARM), infrastructure (Oracle and Microsoft), and software (OpenAI) position Stargate to potentially be one of the most disruptive innovators in the space.

The Impact

The dollars don’t lie. If Stargate successfully executes on their plan to invest $500 billion over the next four years, that equates to a $125B annual cadence. That amount would be a little over half of the entire capital expenditures of the ‘Magnificent 7’ in 2024 (as shown below). If market participants believe future earnings (and market cap) are tied to capital expenditures, Stargate’s capital expenditures may loosely indicate company value. With expected expenditures equal to 54.6% of the Magnificent 7’s expenditures, Stargate may be worth $9.5 trillion if valued in this manner (based on current Magnificent 7 cumulative market cap of $17.3 trillion as of 1/30/2025 close, FactSet data). The impact of Stargate may be bigger than any current company.

The Aim

In my opinion, Stargate may be aiming to produce the world’s largest ‘AI Factory,’ to borrow a phrase from Nvidia CEO Jensen Huang. Mr. Huang, and others including OpenAI CEO Sam Altman, have been bullish on the potential of AI to produce knowledge previously unknown or unsolvable by current techniques. OpenAI, and Microsoft in its latest quarterly earnings call, have noted they remain capacity constrained and have yet to hit their limit of computing needs. This may be OpenAI’s unlock, and it appears partners believe in that too. In an exclusive interview on the BG2 podcast, ARM CEO Rene Haas noted “operational control will be from OpenAI, they’ll call the shots for all the things relative to the operations.”2 It seems OpenAI may soon have as much compute as they can get their hands on if the project is successful. With such aspirational leaders at the helm, the AI innovations may continue to accelerate.

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Project Stargate is in its infancy. A new company, on a scale not many have previously operated, may soon become a powerhouse for AI-based innovations. By bringing together hardware, infrastructure, and software companies, Stargate may produce one of the world’s largest ‘AI Factories.’ With visionary leaders at the forefront of this new company, it may not be long before we see a preview of its potential.

 

 

For more content by Blake Anderson, Senior Analyst, Investment click here.

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