Oracle stock jumped 9% thanks to Trump’s Stargate project

Oracle shares (ORCL.N) jumped nearly 9% in Frankfurt on Wednesday after U.S. President Donald Trump announced a significant investment in artificial intelligence infrastructure by Oracle, OpenAI, and SoftBank (9984.T). Trump unveiled a joint venture called Stargate, which plans to invest $500 billion at the White House the previous day.

This joint venture aims to expedite the development of AI technology by deploying $100 billion “immediately” with a long-term goal of reaching at least $500 billion to establish new infrastructure for OpenAI, including data centers and physical campuses. Masayoshi Son, CEO of SoftBank, will serve as the venture’s chairman.

Initial funding will come from SoftBank, OpenAI, Oracle, and Abu Dhabi state investor MGX, beginning with the construction of the first computing system in Texas. While SoftBank and OpenAI are the lead partners, SoftBank will handle financing and OpenAI will manage operations. Technology contributions will be made by Arm Holdings Plc, Microsoft Corp., and Nvidia Corp., in addition to Oracle and OpenAI.

Trump has indicated a broad strategy to maintain U.S. leadership in AI, encouraging private-sector investment and promising to streamline permit processes and reduce regulatory barriers. This initiative will involve tech industry leaders, including Elon Musk and incoming AI-crypto czar David Sacks, who have joined his administration.

In the wake of Trump’s announcement, shares of SoftBank rose 9.7% in Tokyo, marking their largest intraday increase since August. The S&P 500 saw over 400 shares rise during U.S. trading on Tuesday, with the index up almost 1%, fueled by expectations surrounding the new AI investment initiative.

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During the announcement, Trump stated he would utilize emergency declarations and executive actions to facilitate construction projects, including improved access to energy. Both Trump and the executives emphasized AI’s potential applications in health and other sectors, which they believe will stimulate U.S. economic growth. “AI holds incredible promise for all of us, for every American,” said Larry Ellison, Oracle’s co-founder.

Despite the enthusiasm, uncertainties remain regarding the actual commitments involved. Son had previously met Trump at Mar-a-Lago to discuss SoftBank’s $100 billion investment plans for the upcoming presidential term, which relate to this announcement. Ellison mentioned that many of the data centers for the initiative are already under construction and that OpenAI has proposed substantial plans for investing in AI infrastructure.

Prior to taking office, Trump had announced a $20 billion investment from Dubai-based billionaire Hussain Sajwani for new data centers across the country. Shortly after his swearing-in, he lifted AI restrictions imposed by the Biden administration and enacted measures to enhance U.S. energy development in anticipation of rising power demands from data centers.

However, some skepticism exists regarding whether the Stargate initiative represents a significant increase from past plans. Questions about SoftBank’s capacity to fund the initiative had been raised after last month’s announcement from Son. Bloomberg previously reported that SoftBank may consider leveraging project financing schemes to transform tens of billions into hundreds of billions of dollars, given their ¥3.8 trillion ($25 billion) in cash and equivalents at the end of September.

Kirk Boodry, an analyst at Astris Advisory, suggested that SoftBank might need to contribute $25 billion to $30 billion for its involvement in the project. He anticipates that SoftBank will attract limited partners, likely from the Middle East, as it did with the Vision Fund, while potential asset sales might also be on the horizon. Takashi Fujiwara, head of fixed income management at Resona Asset Management Co., pointed out that this situation could lead to increased expectations for yields on future SoftBank bond issues due to financial pressures on the company.

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Since winning a second term, Trump has maintained close ties with Silicon Valley leaders, including major figures like Musk, Mark Zuckerberg, Jeff Bezos, Tim Cook, and Sundar Pichai, who attended his swearing-in ceremony on Monday.

OpenAI’s CEO Sam Altman has been actively working to build a global coalition among policymakers and industry leaders to ensure the availability of chips, energy, and data center capacity necessary for AI advancement. OpenAI has also communicated to the Biden administration the urgent need for extensive data centers capable of consuming energy comparable to entire cities.

SoftBank has previously invested in OpenAI’s latest fundraising round. According to OpenAI Chief Financial Officer Sarah Friar, the company chose to partner with SoftBank due to its “access to lots of capital” and readiness to invest in critical areas like power and data centers.

In a Fox News interview, Ellison mentioned that the Stargate project has been in development “for a long time.” Construction for the first data centers is already underway in Texas, which will later be transitioned to Altman and OpenAI for the training of their next model.

Altman stated, “The scale of this investment obviously is huge. And what I think that says about the likely progress of the technology, at least what all of us believe, is correspondingly huge.”

As cloud infrastructure providers such as Microsoft, Amazon.com Inc., and Oracle compete to enhance computing capacity, Oracle has already made substantial commitments for building new data centers, with expectations to double its capital expenditures this fiscal year to over $14 billion largely due to these initiatives.

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Featured image credit: Oracle