AI Stocks: Tech Giants, Cloud Titans Face 'Show Me' Moment. Stargate, DeepSeek Emerge.

by REINHARDT KRAUSE
January 26, 2025

Is the artificial intelligence stock market boom still wired or tired? Top AI stocks such as Microsoft (MSFT) and Nvidia (NVDA) face high expectations. For many companies — such as Google parent Alphabet (GOOGL), Amazon.com (AMZN) and Facebook parent Meta Platforms (META) — the rise of generative AI poses both risk and opportunity.

Amid the emergence of generative AI — which generates text, images, and video — it's a good time to be cautious amid the hype, especially given recent developments at Super Micro Computer (SMCI).

Heading into fourth-quarter earnings reports, many Wall Street analysts are focusing on capital spending on data center infrastructure by cloud computing and "hyperscale" companies. AI-driven revenue growth also will be a big topic.

Microsoft and Meta report Q4 results on Jan. 29. Google earnings are due Feb. 4. Amazon will likely follow on Feb. 6. Google stock has gained 6% in 2025 amid growing competition in internet search. But Alphabet continues to under-perform some Magnificent Seven stocks.

Meanwhile, startups OpenAI and Anthropic are battling Google, Meta and others in developing large, multimodal and small language foundation models.

Further, China startup DeepSeek came out of nowhere to release a powerful AI model. It reportedly spent only $5.6 million over two months to develop its latest AI model, which outperformed systems from OpenAI and Meta, noted economist Ed Yardeni in a report.

DeepSeek's success could weigh on U.S. earnings reports, Yardeni said, amid enormous capital spending increases.

"This might be bad news for the Magnificent 7 that had plans to dominate the AI market with their expensive AI services," Yardeni added. "The question is whether they will disappoint because their capital spending on AI is soaring faster than are their revenues. That could squeeze their collective profit margin." He says chipmaker Nvidia also could be impacted.

Trump Good For AI Stocks?

Meanwhile, President-elect Trump is expected to promote the build out of AI data center infrastructure. Also, Trump could repeal President Joe Biden's AI executive order, which required companies training large AI models to share information about them with the federal government. Further, tech giants may have more leeway to acquire AI startups under a Trump administration.

Meanwhile, Trump named former PayPal Holdings (PYPL) executive and Silicon Valley venture capitalist David Sacks as his artificial intelligence and cryptocurrency czar. Further, Sacks is an associate of Tesla (TSLA) and SpaceX founder Elon Musk, who has emerged as a key advisor to Trump.

Stargate Project Announced, Musk Warns

President Donald Trump on Jan. 21 announced "Stargate," a new artificial-intelligence joint venture that will build data centers for ChatGPT maker OpenAI.

Japan's SoftBank Group, Oracle (ORCL), Abu Dhabi's MGX and OpenAI are the initial equity funders in Stargate. Arm Holdings (ARM), Microsoft (MSFT) and Nvidia (NVDA) are technology partners. The companies said they are are committing $100 billion initially and plan to invest up to $500 billion over the next four years. SoftBank's founder Masayoshi Son will be Stargate's chairman.

Funding details are unclear. Oracle had only $10.9 billion in cash on its balance sheet as of Nov. 30, offset by $90 billion in debt, noted the Information.

The Stargate deployment will start at Oracle's data centers under construction in Abilene, Texas.

"While it's possible that the $500 billion figure includes power generation projects and could span beyond four years, the numbers are still massive," said Jefferies George Notter in a report.

Tech industry maverick Elon Musk on social media platform X said: "They don't actually have the money."

Musk has filed a federal lawsuit aiming to block OpenAI's conversion to a for-profit company. Musk left the OpenAI board in 2018. He founded xAI, a developer of foundation models.