Shares of many artificial intelligence (AI)-related semiconductor names were moving higher on Wednesday, including Broadcom (AVGO +0.62%), Lam Research (LRCX +3.55%), and Monolithic Power (MPWR +2.50%), which were up 2.6%, 4.1%, and 8.5%, respectively, as of 1:12 p.m. ET.
These weren't the only three AI-related chip stocks rising today, but this group does showcase a rather broad spectrum of products, from Broadcom's AI networking chips, to Lam's etch and deposition equipment for advanced chipmaking, to Monolithic's AI power modules.
The news lifting all boats in the sector likely had to do with yesterday's announcement of the Stargate data center project by President Donald Trump and a host of other AI technology companies.
NASDAQ: AVGO
Key Data Points
Stargate: Reality or science fiction?
Yesterday, a group of technology companies, including Oracle, Softbank and OpenAI, gathered at the White House to announce Stargate. Stargate is an AI-related joint venture, bringing these companies and other investors together to build out next-generation AI infrastructure in the U.S.
The announcement may have spurred a rally in AI-related chip stocks due to the financial figures the group touted. The companies announced an initial $100 billion investment, but also threw out a $500 billion figure as the potential for future new Stargate expansions over the next four years.
Given that none of these companies make their own chips -- at least not yet -- that stunning figure likely means lots of Nvidia GPUs. Yet even if Stargate primarily uses Nvidia GPUs and not custom ASICs, which Broadcom makes, Stargate will still likely use Broadcom's Tomahawk and Jericho network switching and routing chips. Moreover, all leading-edge semiconductors and memory today require intense etch and deposition steps, which would benefit semiconductor equipment generally and Lam Research specifically, which leads in these crucial chip manufacturing categories.
Meanwhile, these massive data centers will require huge amounts of power, and Monolithic Power provides the 48 volt power management systems used by many AI chip modules. While there has been some debate as to whether Monolithic Power may have lost its dominant share within Nvidia chip modules -- a concern that caused Monolithic stock to plunge late last year -- it should still retain a key share of these AI power module systems. In fact, sell-side analysts at Oppenheimer just named Monolithic as one of the firm's top AI stocks for 2025.
But investors may want to cool their jets on Stargate
While these stocks should climb on continued AI investment news, the Stargate announcement by itself shouldn't be this much of a game changer. After all, the initial $100 billion includes money already spent on a Texas data center in progress that began last year under the Biden administration. So, Stargate doesn't appear to be an entirely new AI cluster, but rather a mere augmentation of one already underway.
Moreover, it's unclear where all this money will come from. As noted in The Wall Street Journal, Oracle only has $11 billion in cash, Softbank has $30 billion, and OpenAI is currently losing money. So, that $100 billion seems like a stretch at the moment, let alone $500 billion.
Still, this high-profile event has followed some other bullish AI investment indicators of late, including the strong earnings report and guidance from Taiwan Semiconductor Manufacturing last week, along with Microsoft's early 2025 announcement that it would be spending $80 billion on its own AI infrastructure this year.
Thus, it's no surprise to see these AI infrastructure stocks moving higher today on the cumulative good news. And with Lam Research and Monolithic having had subpar years last year, it's no surprise to see their stocks rallying even more in a "catch-up" trade.
Still, while today's announcement was a positive, it would be wise not to over-hype vague announcements in the early days of the new administration. Continued moves higher will require sustained AI investment, as well as evidence that customers are seeing productivity gains and returns on all of this massive spending.
