Artificial intelligence (AI) companies saw revenue soar last year as data centers built out infrastructure and customers launched AI projects -- and as a result, investors piled into shares of players involved in this high-growth technology. These stocks even drove index gains last year, with AI chip designer Nvidia (NVDA 0.10%) scoring the best performance in the Dow Jones Industrial Average and AI software company Palantir Technologies posting the greatest gain in the S&P 500.
Following such momentum, many investors wondered if AI players had seen their best days in 2024 and if growth might stagnate in the new year. After all, revenue and stock prices rarely advance nonstop without marking a pause at some point. But right now may not be the time for any kind of slowdown.
Newly inaugurated President Donald Trump along with AI leaders Oracle, OpenAI, and SoftBank this week announced a $500 billion AI project to assure U.S. leadership in the technology. And my prediction is one stock in particular will be the biggest winner of this massive investment. Let's find out more.
Image source: Getty Images.
The Stargate Project
So, first, let's dive into the Stargate Project. Oracle, OpenAI, and SoftBank, immediately investing $100 billion, will create a new company called Stargate to build out AI infrastructure in the U.S. The total investment may reach as much as $500 billion within a period of four years.
Trump called Stargate the "largest AI infrastructure project in history," and OpenAI said in a statement that the project "will secure American leadership in AI." OpenAI also listed Arm, Microsoft, Nvidia, and Oracle as the project's main technology partners.
The announcement didn't offer details about how much of the investment would go to particular companies for their products and services -- but I predict the biggest winner of this deal will be Nvidia.
To understand why, it's important to take a look at the AI chip giant's path so far. Nvidia has built a dominant position in the world of graphics processing units (GPUs), or the chips that power crucial AI tasks like the training and inferencing of large language models. The company offers the world's most powerful GPUs, and customers aiming to lead in AI generally want the best for their projects -- so turn to Nvidia for GPUs.
This is confirmed by what Nvidia chief Jensen Huang has called the "insane" demand for the company's latest AI architecture and chip, Blackwell. Demand has surpassed supply as the company launches this new platform, and the world's biggest tech companies -- from Microsoft to Oracle -- are customers.
This buildout needs top GPUs
It's clear that this buildout, requiring data centers and accelerated computing systems, needs GPUs and related products. And the intention to make the U.S. a worldwide leader implies the need for the best possible materials. Enter Nvidia's GPUs.
"As part of Stargate, Oracle, Nvidia, and OpenAI will closely collaborate to build and operate this computing system," OpenAI said in the announcement.
Considering that a single Blackwell GPU costs between $30,000 to $40,000, and Nvidia customers generally purchase systems incorporating many GPUs, this new infrastructure buildout represents a considerable opportunity for Nvidia. (For example, Nvidia customers may opt for the GB200 NVL72, which connects 72 Blackwell GPUs and several central processing units or the main processors that power standard computers.) All of this means Stargate could quickly add up to an enormous revenue stream for Nvidia.
What does this mean for investors?
So, what does this mean for you as an investor? Right now, Nvidia stock trades for 49x forward earnings estimates, and this may seem expensive. But this valuation actually is reasonable considering the tech giant's earnings track record -- double- and triple-digit revenue growth in recent quarters along with gross margin topping 70% -- and long-term prospects.
Today's $200 billion AI market is expected to soar beyond $1 trillion by the end of the decade, setting the stage for more growth ahead for Nvidia. And on top of that, my prediction is Nvidia, thanks to the quality of its GPUs, will benefit more than any other company from the Stargate Project.
So, this AI star's enormous gains may be far from over, and that makes it a solid buy for investors right now.
