It is no secret that the technology sector has earned most of the stock market’s attention for the better part of two years now, especially with the advent and adoption of artificial intelligence at the forefront. Today, more and more investors are familiar—and aware—of what this new technology can do. However, one major issue still stops it from fulfilling its true potential.
That issue concerns energy efficiency and supply, which today’s rates fail to satisfy considering the massive needs that artificial intelligence development and operations command from the grid. To simplify the issue for investors, this technology needs the proper infrastructure, software, and energy supply to run data centers, and that has been made the center of the new $500 billion investment in what’s now being called the Stargate project.
Of course, some stocks in the front lines of this new development will benefit more than others, which is why investors should keep an eye on today’s list. These names include companies like Microsoft Co. (NASDAQ: MSFT), Oracle Co. (NYSE: ORCL), the classic semiconductor darling NVIDIA Co. (NASDAQ: NVDA), and even cloud giant Alphabet Inc. (NASDAQ: GOOGL).
Price Action Gives a Hint
Suppose price action can be taken as an indicator of sentiment in the stock market. In that case, the charts for the past five days can tell investors where the real upside – and action – might be when this $500 billion investment is made into infrastructure for artificial intelligence and data centers.
Over the past five days, Oracle shares led the pack with a 13.5% performance over the rest of the names in this list, with NVIDIA following in second with a rally of 5.1%. However, this doesn't mean there will be only one winner in this race; rather, the value chain will be timed differently for each.
With this in mind, investors can see that Oracle was favored first because of its exposure to the cloud infrastructure business, which is set to host the artificial intelligence models and applications to be developed in this growing network of developers and companies.
Knowing that this is Oracle's positioning, some Wall Street analysts decided to let their optimistic views be known to the broader market. For example, analysts from Cantor Fitzgerald initiated coverage on Oracle stock a few hours after the $500 billion announcement was made, with an overweight rating and a $214 a-share valuation.
To prove this new view right, the stock would have to rally up to 16.5% from its current level and make a new 52-week high. This is also why institutional buyers from Robeco Institutional Asset Management built up a stake of up to $274.6 million days after the announcement.
Second in line will be NVIDIA. Now that Oracle has taken care of the software end of things, Nivida is needed to solve the project's hardware gap.
This is why those at HSBC followed suit by reiterating a buy rating on NVIDIA stock and, this time, placing a $185 price target on it.
From today's price, this new view suggests that the stock needs to run up to 29.2% and deliver another double-digit upside scenario for its investors.
Microsoft & Alphabet Come Next
After NVIDIA and Oracle have laid the groundwork, it’s time for the bigger players in this race to start reaping the benefits. Investors can think of the land development, the pipework, and the concrete foundation as achievements made by both Oracle and NVIDIA.
From there, the developers who take credit for the finalized building will be the bigger names with the resources to make it all happen. This is why it’s essential to keep an eye on the stocks of both Microsoft and Alphabet, Google’s parent company, a fact that Wall Street has increasingly recognized.
Analysts from Morgan Stanley also decided to reiterate their overweight rating on Microsoft stock just days after the announcement, calling for up to 22% upside through their $540 a share valuation. Then there is the gauge investors can take from a recent 8.8% boost in holdings from institutional buyers in the Cibc World Market.
After this allocation, the group’s net position reached a high of $785.7 million as of late January 2025. The trend is set for this late player in the Stargate project, and so it is for Alphabet. Over the past month, Alphabet’s short interest collapsed by 7.8%, giving investors a sign of bearish capitulation in the face of this new development.
More than that, institutional buyers from Davenport & Co. boosted their Alphabet stock holdings by 1.4% as of January 2025. This may not sound like much on a percentage basis. Still, it did bring the group’s position to a high of $182.4 million today as another bullish sign in the Stargate investment outlook.
