If there were any fears that spending on artificial intelligence (AI) infrastructure was about to slow down, that was put to rest when President Donald Trump announced the new Stargate AI project last week. Backed by OpenAI, Oracle (ORCL +6.65%), and Japan's Softbank, the consortium plans to spend $500 billion over the next four years building out data centers to help handle the growing AI workload.
The consortium plans to initially construct 10 data centers and then expand to 20. Oracle Chairman Larry Ellison said data center construction was already underway, with the first set to be built in Abilene, Texas. Softbank is the main financial backer, with $100 billion set to be deployed immediately.
The project announcement said Oracle, Nvidia (NVDA 0.48%), and OpenAI would collaborate to build and operate the venture's computing system, while OpenAI would be responsible for overseeing the venture's operations.
With such a huge project underway, let's look at three potential AI winners from this venture.
1. Nvidia
Nvidia will undoubtedly be the biggest winner of the Stargate project. The company will be involved in building the data centers' computing systems, which will no doubt consist of a whole lot of Nvidia's graphic processing units (GPUs). With a 90% market share in the GPU space and a major role in the project, it will likely be the only supplier of GPUs for these data centers.
NASDAQ: NVDA
Key Data Points
In the past, when Microsoft has talked about its capex (capital expenditures) spending on AI, it has said that about half goes toward assets with long practical lives (the land and buildings, for example), while the other half goes toward GPU and CPU (central processing unit) servers. As such, this indicates that a lot of this project's costs will be directed toward Nvidia's GPUs.
Stargate could also spur further AI data center investments for other large tech companies. Microsoft, which is Nvidia's largest customer, already announced it would spend $80 billion on AI data centers, while Meta Platforms just announced it would spend $65 billion on AI infrastructure this year.
The AI race is heating up, and Nvidia looks like the biggest beneficiary. Meanwhile, the stock remains reasonably valued, trading at a forward price-to-earnings (P/E) ratio of only about 32.5 based on 2025 analyst estimates and a price/earnings-to-growth ratio (PEG) of 1. A PEG under 1 is generally considered undervalued, but growth stocks often command PEGs well above 1.
Image source: Getty Images.
2. Oracle
With Oracle as part of the consortium behind Stargate, the company is looking to elevate itself in the cloud computing space. It's a distant fifth in cloud computing market share, with only 3%. It's behind the big three cloud computing companies -- Amazon (31% market share), Microsoft (20%), and Alphabet (12%) -- and trails China's Alibaba (4%) as well.
NYSE: ORCL
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Nonetheless, Oracle has been seeing strong growth in the cloud computing space. Last quarter, its cloud revenue jumped 24% year over year to $5.9 billion, with cloud infrastructure revenue surging 52% to $2.4 billion and cloud application revenue increasing 10% to $3.5 billion. Its Oracle Cloud Infrastructure (OCI) consumption revenue soared by 52%, while GPU consumption skyrocketed by 336%.
It boasted that OCI was faster and less costly than other cloud networks and that it was training some of the world's most important generative AI models. The company also noted that its customers include OpenAI, xAI, Cohere, and Meta Platforms.
One advantage Oracle has in the cloud computing space is that its data centers are relatively new. It also has multi-cloud agreements with the big three cloud computing companies, allowing customers to use its services with multiple cloud providers within a single environment.
While its cloud business is doing well, Stargate represents a huge revenue growth opportunity for the company. Even with the first data center under construction, it will take time before it is built and then ramps up. As such, expect it to start to be a big growth driver in a couple of years. Morgan Stanley has estimated the first data center could add $10 billion in annual revenue in fiscal year 2027 (ending May 2027).
3. Taiwan Semiconductor Manufacturing (TSMC)
While not involved in the Stargate project, more data center spending means the need for more advanced chips, which means Taiwan Semiconductor Manufacturing (TSM +0.42%), or TSMC for short, is once again a big beneficiary. The company is the world's largest semiconductor contract manufacturer and is the primary manufacturer of Nvidia's GPUs.
NYSE: TSM
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With its rivals Intel and Samsung struggling, TSMC has flourished. Its strength in 3-nanometer and 5-nanometer technologies makes it the undisputed leader in high-performance computing. In Q4, its revenue surged 37%.
The company's leadership position has also given it strong pricing power. It has reportedly once again raised prices for its services this year. This has also been leading to gross margin expansion, with its gross margins improving by 600 basis points year over year to 59% in Q4.
Between Stargate, Microsoft, and Meta's AI infrastructure spending, there will be a lot of future demand for TSMC's chipmaking services. Expect this to continue to drive strong growth in the years ahead as the company increases its own manufacturing capacity.
The stock also trades at an attractive valuation, with a forward P/E ratio of under 25 times 2025 analyst estimates.
