Two massive developments have come out in recent weeks surrounding the AI investment landscape. The first came on Jan. 21, with the announcement of The Stargate Project. It looks to invest $500 billion in AI infrastructure for ChatGPT creator OpenAI. President Trump's praise of the project made the announcement even more notable. Besides the big-name beneficiaries of this partnership, like NVIDIA (NASDAQ: NVDA), many suppliers and other companies can benefit too. I will discuss some of them below.
It is important to add context to this announcement by highlighting the other key AI news regarding DeepSeek. The company purportedly was able to build an AI model that rivals ChatGPT for a fraction of the cost. This led to a big sell-off in many big tech and chip names. Uncertainty is rising about DeepSeek's claims and their implications. MT Newswires reports that Bank of America analyst Vivek Arya believes DeepSeek's success could actually help the AI computing industry. He said, “We believe the emergence of China's DeepSeek model could spur even higher AI spend from US hyperscalers" as they look to pursue general artificial intelligence. DeepSeek could still dampen AI investment significantly, but that remains to be seen.
Arista Networks: Directing Traffic in Data Centers
Arista Networks (NYSE: ANET) Arista Networks is a key maker of Ethernet switches for cloud data centers. Ethernet switches are essentially the hardware that directs the flow of data between different components in a data center. One of the key needs for data centers as AI proliferates is the ability to move more and more data. Arista Networks has found great success through this. It leads the market in high-bandwidth data center Ethernet switches.
Another key component of its technology is that it is easily upgradable. It works well with components from different companies. So, data center operators aren't locked into certain suppliers. This is a big positive in an industry where technology is advancing fast, and leaders in one technology today may not be the same as those of tomorrow. Arista stands to benefit significantly as AI advances and the need to process more data increases. The Stargate announcement adds fuel to this, indicating massive capital expenditure over the next few years in building and updating data centers.
Equinix: A Home for Computing Power
Equinix (NASDAQ: EQIX) is a data center real estate investment trust (REIT) and also stands to benefit from the Stargate announcement. Equinix provides real estate for data centers to store their computing power. It also provides liquid cooling systems and power equipment needed to run advanced chips. Hyperscalers pay Equinix for space in their facilities. Microsoft (NASDAQ: MSFT) and Oracle (NYSE: ORCL) provide the computing power for OpenAI. They have significant relationships with Equinix. Microsoft Azure locates 44% of its on-ramp nodes in Equinix facilities. For Oracle, the number is 49%. On-ramp nodes let end users connect securely to Azure and Oracle. They can do this without using the public internet.
As companies invest billions in AI infrastructure to enhance OpenAI’s capabilities, they could increase the demand for Equinix’s facilities to house computing power. Also, if ChatGPT's abilities improve, more companies may want a direct link to the data centers that run OpenAI's computing. Given that the company is clearly a trusted provider of infrastructure to Microsoft and Oracle, it is likely that they will continue directing demand to it.
Caterpillar: Construction Equipment Demand Will Benefit
One company that could benefit from the Stargate Project in a more indirect way is Caterpillar (NYSE: CAT). Stargate plans to invest billions to build new data center campuses. Caterpillar, a key maker of construction equipment, stands to benefit from these massive construction projects. Extrapolating on data from JLL, constructing the base building of a 1 million square foot data center costs between $125 million and $200 million. These costs would likely lead to higher spending on Caterpillar's construction equipment.
Additionally, there could be significant investment in building more electricity generation facilities in order to power these data centers. AI is rapidly increasing the amount of electricity the United States needs to power the technology. Overall, shortages of supply are likely to challenge the energy grid in the coming years, meaning that companies need to build new power generation facilities. Sales of Caterpillar equipment should also benefit from this. Aside from construction equipment, Caterpillar also provides backup generators for data centers and technical expertise in constructing them.
