What is Project Stargate? Why this $500-billion AI initiative could herald a ‘platform shift’

This week US President Donald Trump announced a joint venture between OpenAI, Japanese conglomerate SoftBank Group, and Abu Dhabi’s AI-focused sovereign wealth fund MGX, to put as much as $500 billion over multiple years into US data centers dedicated to artificial intelligence.  

Trump appeared at the White House with OpenAI CEO Sam Altman, SoftBank chairman Masayoshi Son, and Oracle founder Larry Ellison. Oracle is one of the technology partners for the joint initiative — dubbed Stargate — along with Microsoft, ARM Holdings, and Nvidia. 

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The funding, meant to provide “colossal” data centers of 500,000 square feet, comes on top of an enormous amount of capital spending planned by the largest tech firms. 

According to one Wall Street analyst, Jackson Ader of the KeyBanc Capital Markets brokerage, “Capital spending for the major hyperscalers” — that is, Amazon, Alphabet, Microsoft, Oracle, Meta, and Alibaba — “will be $286.5 billion in 2025, and $308.8 billion in 2026, after making some adjustments to consensus estimates.”

Given that, writes Ader, “Depending on who else contributes to the project [Stargate], the incremental investment is likely more muted.”

While that nearly $300 billion this year won’t all be dedicated to AI, it’s to be expected that AI would receive an increasing proportion of tech spending; after all, AI is driving more and more cloud computing services, and racks of Nvidia GPU chips for AI training and inference are among the most expensive tech purchases.

But if the initial $100 billion planned for Stargate is just a dollop on top of all that planned spending, it is still encouraging to Ader and others who have been forecasting high AI spending for years to come. 

“Stargate adds fuel to the narrative that we are still early in the capex buildout required for AI and signals that the new administration is likely to be highly supportive of the investment and energy requirements of the AI platform shift,” wrote Wall Street tech analyst Sebastian Naji this week in a letter to his clients. 

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Similarly, hardware analyst Matthew Bryson of Wedbush Securities, who follows Nvidia and other chip makers, wrote in a note to clients that Stargate “highlight[s] the seemingly unending and growing stream of capital being invested in AI.” 

Numerous questions remain regarding the initiative. 

SoftBank’s Son is responsible for putting together the initial $100 billion, and it is not yet clear where that money will come from. 

In a note to clients, tech analyst Brad Zelnick of the investment bank Deutsche Bank noted that one big question is the “ownership and financial structure of the new joint venture the sources and amount of committed funding already in place, plans for future funding and how it will be accounted for within the financial results of each company.”

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Others have raised questions as well, including Trump’s efficiency czar, Elon Musk. On X this week, Musk tweeted, “They don’t have the money,” meaning, the stated $100 billion, to which OpenAI’s Altman shot back at Musk, “Wrong, as you surely know.”  

AI critic Gary Marcus weighed in on Substack, calling it an “AI catfight.”

“Elon thinks Sam is playing the same move that they once played together,” when the two were forming OpenAI and had not yet produced money but were telling people they had. “He could be right,” adds Marcus, “neither is known for absolute candor.”

Deutsche Bank’s Zelnick added other questions. How much of the new data centers might be dedicated to AI training, and how much to inference? How will the Stargate company make money off of it? Will it change the amount of capital that Microsoft has to invest in OpenAI, and, if so, will it also change how much of OpenAI’s revenue and profit Redmond will collect? 

Zelnick is adamant about one thing: The venture is a big win for Oracle’s Ellison in his competition with cloud giants. 

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“This is a win for Oracle, if for no other reason than further cementing OCI’s [Oracle Cloud Infrastructure] relevance in the future of AI,” writes Zelnick. 

“The more we learn, the more we appreciate the unique challenges of addressing the massive scale and performance demands of AI workloads,” he writes, “and view this announcement as further endorsing OCI’s capabilities.”