The Stargate AI Venture Can Benefit Stocks and Sectors Beyond Oracle and Nvidia

President Trump’s announcement of a $500 billion Stargate joint venture focused on artificial intelligence infrastructure has sparked interest across industries, with several companies poised to benefit. While prominent names like Oracle Corp., Nvidia Corp., Microsoft Corp., and SoftBank Group have already been involved and saw modest stock gains, many lesser-known players across various sectors could also capitalize on the initiative as AI infrastructure develops.

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The Stargate project aims to build AI-driven data centers across the U.S., benefiting networking companies like Arista Networks and Ciena Corp. Arista, closely tied to Microsoft, surged 6.9% on Wednesday, as analysts anticipate the company's AI-related data-center sales goals of $1.5 billion this year could be significantly exceeded.

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Ciena, which supplies both Microsoft and Oracle, gained 7% as its wavelength-division-multiplexing technology could play a key role in connecting these data centers. Jefferies analyst George Notter also highlighted other potential winners in this space, including Coherent Corp., Lumentum Holdings, Fabrinet, and Corning Inc. These companies produce transceiver sockets and fiber-connectivity products, which are essential for data-center networks.

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The U.S., already home to half the world’s data-center capacity, is in a global race to expand infrastructure as demand for AI applications grows. With global data-center capacity expected to grow by 15% annually over the next few years, companies like Vertiv Holdings and Schneider Electric stand out.

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Vertiv, known for its advanced cooling technologies for high-temperature GPUs (graphics processing units), rose 3.8% on Wednesday. Evercore ISI analyst Amit Daryanani has praised Vertiv’s edge over competitors in handling energy-intensive GPUs. Similarly, France’s Schneider Electric, which specializes in energy management, saw a 2% rise in its shares, reflecting enthusiasm for the AI infrastructure buildout.

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While data-center real estate investment trusts (REITs) like Digital Realty Trust and Equinix saw fractional declines on Wednesday, both had rallied earlier in anticipation of the Stargate announcement. UBS analyst John Hodulik recently noted that generative AI has intensified demand for data-center operators.

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The top 10 data-center companies, including Amazon, Meta Platforms, Alphabet, and Apple, have collectively increased annual spending from $200 billion to $300 billion. These companies, primarily U.S.-based, remain critical drivers of the sector’s growth.

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William Blair analyst Sebastien Naji identified memory suppliers such as Micron Technology and SK Hynix as potential beneficiaries of Stargate. Memory is a key bottleneck in AI data centers, particularly for inference applications. Naji also highlighted Astera Labs, a company producing memory retimers integrated into Nvidia’s servers.

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Naji emphasized that the construction of 20 new data centers as part of the Stargate initiative could boost demand for energy, cooling systems, and other industrial components. For example, while an initial $100 billion investment might cover data-center construction, the total cost of operationalizing these facilities—including chips, servers, and supporting technologies—could multiply to three to five times the initial figure.

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The expansion of AI-driven data centers is driving substantial energy demand, a critical consideration for the industry. Recent data-center projects are scaling rapidly, with Patrick Wilson, a portfolio manager at CenterSquare Investment Management, highlighting the increased strain on America’s power grid.

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Five years ago, data centers consumed about 3% of the U.S. power grid’s output. That figure has since climbed to 5%, and projections suggest it could surpass 10% in the coming years. Some estimates put the number as high as 12% to 13%.

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Natural gas and renewable energy technologies are expected to meet some of the additional demand, but Wilson noted that nuclear power is being touted as the "true solution" for sustainable energy supply. However, nuclear power development could take over a decade to implement fully.

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The urgency to expand AI infrastructure stems from its potential applications in critical areas like healthcare, agriculture, and national security. “It’s certainly not the race you want to lose,” Wilson commented, emphasizing the rapid integration of AI across industries.

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In conclusion, the Stargate initiative represents a monumental investment in AI infrastructure, offering opportunities for a diverse range of companies. From networking and memory suppliers to data-center operators and energy providers, the ripple effects of this project could redefine multiple sectors. However, as the industry races to meet growing demands, challenges such as energy constraints and inflationary pressures must be carefully navigated.

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For investors, the AI push offers substantial growth potential, but it also underscores the importance of a balanced approach to managing resources and scaling technologies effectively.

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