A high-profile announcement by the White House about investment in artificial intelligence is a shot in the arm for Nvidia and a host of other portfolio stocks caught up in the AI boom. News OpenAI, Oracle, Softbank and investment fund MGX founded a new company – called Stargate Project – to build AI infrastructure in the US In a press release, ChatGPT creator OpenAI said that $100 billion will be distributed “immediately “, with plans calling for a total of $500 billion in investment over the next four years. Construction has already begun on the first Project Stargate data centers in Texas, Oracle Chairman Larry Ellison said Tuesday evening — appearing alongside OpenAI’s Sam Altman, Softbank CEO Masayoshi Son and President Donald Trump. The event confirms previous reports – dating back to early 2024 – about OpenAI’s ambitions to expand its computing footprint into Club USA holdings Nvidia and Microsoft, which have maintained a close relationship with OpenAI for years. are among the “key initial technology partners” for Project Stargate, according to a press release. Oracle, Nvidia and OpenAI intend to “work closely together to build and operate this computing system,” the announcement said. It also read: “OpenAI will continue to increase its Azure consumption as OpenAI continues its work with Microsoft with this additional compute to train key models and deliver great products and services.” Investors are optimistic about the news. Shares of Nvidia rose 3.5% on Wednesday to nearly $146 each. That’s on top of a 2.3% gain in Tuesday’s session, driven by afternoon reports of the upcoming AI infrastructure announcement. Microsoft added 3% to about $437 a share after a muted session on Tuesday. Other Club companies that were not explicitly named in the press release or during the White House event were in the news. Shares of Eaton, an electrical equipment supplier with a significant data center presence, rose 4%, building on a gain of more than 3% on Tuesday. Strong results from electronics connector maker Amphenol are also boosting sentiment at Eaton. Dover, another AI data center but to a lesser extent, initially climbed on Wednesday before boiling over. The stock gained 1.7% in the previous session. The Big Picture The generative AI gold rush continues as companies scramble to build more computing infrastructure to meet the demands of the nascent technology. Billions upon billions of dollars have already been invested since ChatGPT launched in late 2022, fueling the AI boom. The Stargate project shows there are many more on the way, an encouraging sign for investors in companies that benefit from aggressive spending. Nvidia, the leading maker of AI chips, is the epitome of the AI boom. And, in a note to clients, analysts at UBS said Project Stargate could extend Nvidia’s runway for growth beyond the next calendar year. But there’s a lot more inside these data centers than just Nvidia’s graphics processing units, or GPUs, and that’s where players like Eaton and Dover come into play. Eaton is a major player in electrical systems for data centers, utilities and other commercial and industrial markets. A diversified industrial, Dover liquid cooling technology for high-powered servers containing Nvidia GPUs is a key area of growth. One question mark surrounding the Project Stargate announcement is the developing ties between OpenAI and Microsoft, given that the creator of ChatGPT and Oracle are creating a more comfortable relationship through this initiative. In a press release, Microsoft said that core parts of its OpenAI partnership are still in place until 2030, such as revenue-sharing agreements and OpenAI’s application programming interface, or API, being exclusive to Microsoft Azure cloud computing platform. The big change is that Microsoft now has the right of first refusal on new computing capacity for OpenAI. “To further support OpenAI, Microsoft has adopted OpenAI’s ability to build additional capabilities, primarily for research and model training,” the company said. Some on Wall Street see the change as a positive for Microsoft. Analysts at Wells Fargo said the tech giant can now “only get the highest margin or most consistent calculations” from OpenAI, with its preference for day-to-day use of AI models, known as inference, ahead of more. intensive training process. It also helps Microsoft “offload” some capital spending to other companies, Wells Fargo argued. Microsoft already aims to spend $80 billion on AI data centers in its 2025 fiscal year, which ends in June. “I think the partnership with OpenAI, for us, is a critical partnership. We love it. It’s working. It’s created a lot of value for us and we plan to move forward with it,” Microsoft CEO Satya Nadella said in a statement. CNBC interview Wednesday from the World Economic Forum in Davos, Switzerland. Conclusion The spending committed by Project Stargate, if realized, should provide tailwinds to our basket of AI stocks in the medium to long term. In the short term, the market reaction offers an opportunity in Dover. “Dover is a great stock to own,” Jim said during Wednesday’s morning meeting, arguing that CEO Richard Tobin could further reshape his business portfolio to focus on higher growth areas. fast. As the stock fell on Wednesday, Jim said he would buy the stock. Nvidia has become a “battlefield” name recently, Jim said. However, its leading position in the AI race is unchanged. While we’re pleased to see Microsoft land a bid on Wednesday, it’s too early to tell if the stock has actually found its footing. The stock’s recent underperformance has been “problematic,” Jim said. “This is a company that could miss its numbers” when it reports earnings Wednesday night, Jim said. “Now, that doesn’t mean we have to abandon ship.” (Jim Cramer’s Charitable Trust is long NVDA, MSFT, ETN and DOV. See here for a complete list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim does a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. INFORMATION ON MESIPERM INVESTMENT CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, INCLUDING OUR STATEMENT. 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From left, President Donald Trump, Oracle CEO Larry Ellison, SoftBank CEO Masayoshi Son and OpenAI CEO Sam Altman appear in the Roosevelt Room of the White House in Washington on January 21, 2025. Trump announced a joint venture to fund artificial intelligence infrastructure.
Aaron Schwartz | How | Bloomberg | Getty Images
A splashy announcement from the White House about investment in artificial intelligence is a shot in the arm Nvidia and a host of other portfolio stocks caught up in the AI boom.