Following reports of a significant breakdown in the $500 billion Stargate AI initiative, shares of major AI chipmakers, including Nvidia (NASDAQ: NVDA), AMD (NASDAQ: AMD), Broadcom (NASDAQ: AVGO), Taiwan Semiconductor (NYSE: TSM), Arm Holdings (NASDAQ: ARM), Marvell Technology (NASDAQ: MRVL), and Qualcomm (NASDAQ: QCOM), dropped on Tuesday.
Elon Musk casts doubt on AI company Stargate
The project has stalled and lost much of its original scope due to tensions between SoftBank founder Masayoshi Son and OpenAI CEO Sam Altman. The comprehensive plan to transform the world’s AI infrastructure has shrunk to a single data center in Ohio, which the team expects to complete by year’s end. The feud has seriously undermined Stargate’s momentum since its high-profile White House debut earlier this year and has left the company without any secured data center deals.
Control is at the heart of the conflict. At first, Altman and Son decided that Son would be in charge of finance and Altman would be in charge of operations. However, disagreements over strategic direction and governance have caused the partnership to fail. According to reports, the internal impasse has significantly slowed execution and stopped important decisions. Elon Musk responded to a resurgent allegation that the Stargate project lacked actual funding by writing on X, formerly Twitter, “They simply don’t.” In a previous post, Musk claimed, “They don’t actually have the money.” Musk has long questioned Stargate’s financial support; his comments reappeared after news of the OpenAI and SoftBank dispute broke.
The company’s strategy
Recent reports from June indicated AMD was gaining traction despite Nvidia’s ongoing chip shortage due to the high demand for AI. Given Nvidia’s limited supply, companies like Oracle (NYSE: ORCL) and OpenAI started assessing AMD’s next-generation Instinct GPUs, which are made for AI workloads, as potential substitutes for projects like Stargate.
Arm Holdings also reinforced its strategic importance in the AI ecosystem by joining Stargate in February. During the company’s third-quarter earnings call, CEO Rene Haas spotlighted Arm’s growing footprint in data center infrastructure through partnerships with OpenAI, Oracle, and SoftBank. Arm’s chip architecture will serve as the foundation of the Stargate initiative, starting with an 875-acre AI campus in Abilene, Texas. The site will launch with a 200-megawatt facility, with plans to expand capacity to 1.2 gigawatts—further evidence of Arm’s critical role in powering the future of large-scale AI systems.
Skepticism is growing in the tech and financial sectors as the Stargate vision shrinks under leadership conflict. The uncertainty has alarmed semiconductor investors, who have driven major AI chip stocks lower and raised concerns about the long-term sustainability of what they once viewed as one of the most ambitious infrastructure projects in AI history.
Featured Image Credit: Google DeepMind; Pexels: Thank You!
