Stargate, a new major AI infrastructure collaboration between OpenAI, Softbank and Oracle Corp (NYSE:ORCL, ETR:ORC), will have major implications for the “AI trade,” analysts at UBS believe.
The project, which is set to invest $500 billion over the next four years starting with an initial $100 billion, aims to secure American leadership in AI.
Analysts believe the initiative will secure enormous capacity for OpenAI in its race against Google, Meta, xAI and Anthropic.
The collaboration also positions Oracle as a key GPU infrastructure provider, ending an exclusive computer relationship between Microsoft Corp (NASDAQ:MSFT) and OpenAI that has allowed the AI firm to scale up.
“In our view, it is entirely plausible that the Stargate news was not forced on Microsoft, but that Microsoft viewed exclusively financing OpenAI no longer made sense from a risk and capital allocation standpoint,” they wrote.
“Put another way, OpenAI’s massive scale ambitions (specifically in terms of required GPU compute capacity) may have been running up against Microsoft’s desire to exclusively serve them.”
They see this as “ultimately good” for Microsoft, as it puts OpenAI in a stronger position to “win the model war.”
Analysts wrote they will be watching to see if Microsoft retains 100% of OpenAI inference revenues, if the new OpenAI commitment signals a change in recurring revenue, what happens with Microsoft’s OpenAI rights after 2030, and how Microsoft’s right of first refusal on new OpenAI capacity needs will work.
Regarding the impact on Oracle, UBS believes the firm is “a natural and expected choice” for additional training GPU capacity beyond Microsoft.
“In our view, this is a clear net positive for Oracle shares and its Oracle Cloud Infrastructure (OCI) trajectory in the coming years,” they wrote.
Stargate raises a number of questions for the analysts, including how much of the revenue uplift is new versus what Oracle has included in its fiscal 2029 revenue guidance, its impact on margins and the spike in Oracle’s backlog.
UBS repeated its ‘Buy’ rating on both Microsoft and Oracle. Microsoft shares traded up 3.5% at $443 while Oracle added 6.5% at $183 shortly before noon on Wednesday.