Oracle Stock Slips. Why a Slow Start to Project Stargate Isn’t a Crisis.

Oracle shares have risen 86% in the past three months. (Photo by Justin Sullivan/Getty Images)

Oracle shares are taking a hit as doubts emerge about the pace of the $500 billion Stargate artificial-intelligence infrastructure project. But the software and cloud-computing company still looks set to benefit from a strong partnership with OpenAI.

Oracle shares were down 2.8% at $236.71 in early trading after The Wall Street Journal reported late Monday that the project had been scaled back in the near term. The stock is still up 86% over the past three months.

The Stargate venture is a cooperative effort to build AI facilities involving OpenAI, best known as the developer of ChatGPT; Oracle; and Japan’s SoftBank Group. Disagreements between OpenAI and SoftBank mean the project’s goals for this year are limited to building one small data center, according to the Journal, which cited people familiar with the matter.

OpenAI and SoftBank didn’t immediately respond to requests for comment on the report. However, OpenAI appeared to indirectly push back against any concerns on Tuesday, announcing an agreement with Oracle to develop 4.5 gigawatts of additional Stargate data-center capacity in the U.S., containing more than two million chips.

The announcement didn’t entirely come as a shock. Oracle had already disclosed a cloud-computing deal worth $30 billion annually from its fiscal year 2028, which was widely reported to be with OpenAI.

Still, it is confirmation of an enormous commitment. According to Goldman Sachs, the entire data-center capacity in North America stood at 22 gigawatts at the end of 2024. OpenAI didn’t say where it expects to build the facilities or provide details about how they will be funded.

“Complementing this expansion with Oracle, our partnership with SoftBank is moving forward with strong momentum. Both are critical to meeting OpenAI’s continually expanding compute needs,” OpenAI said in a blog post.

The exact make up and funding sources of Stargate have been unclear since the beginning. OpenAI said it now expects the overall investment to exceed the initially pledged $500 billion and that its definition of the project includes deals struck with the AI cloud-rental company CoreWeave and Microsoft .

“Stargate is OpenAI’s overarching AI infrastructure platform—encompassing ongoing data center partnerships with Oracle, SoftBank and CoreWeave and international investments in U.S. infrastructure,” OpenAI said. “Microsoft will continue to provide cloud services for OpenAI, including through Stargate.”

No matter the exact makeup of the project, Oracle looks set to benefit in the long run. UBS analyst Karl Keirstead raised his price target on Oracle to $280 from $250 in a recent research note, reiterating a Buy rating on the stock. He noted there is potential for Oracle to take more of OpenAI’s computing-infrastructure business away from Microsoft and to potentially use the relationship with the ChatGPT developer to boost its own software products.

“While tempting to pivot to the cheaper seat-based SaaS [Software-as-a-Service] stocks for which investor sentiment is depressed, we’ve advocated for the infra/data stocks for some time and hold to that view. Oracle is, needless to say, heavily exposed to the infra/data layers,” Keirstead wrote.

Write to Adam Clark at adam.clark@barrons.com