Artificial intelligence stocks are jumping in morning trading after President Trump announced a $500 billion AI infrastructure plan yesterday. Coherent (NASDAQ:COHR | COHR Price Prediction), Credo Technologies (NASDAQ:CRDO), and Lumentum Holdings (NASDAQ:LITE) were all up 3% or more on the news.
The project is a joint venture between Oracle (NYSE:ORCL), OpenAI, and Japan’s SoftBank (OTC:SOBKY). Called Stargate, the purpose is to build “the physical and virtual infrastructure to power the next generation of AI,” including data centers around the country.
The first 1-million-square foot data center is already under construction in Texas. There are plans to build more in other states in the future.
What happened?
Trump introduced Stargate where the partners plan to invest $100 billion in the project with as much as $500 billion contributed over time. It is expected to create 100,000 jobs.
Although Coherent, Credo, and Lumentum were not mentioned as participants in the project, AI stocks generally rose in response to the announcements as enthusiasm for private sector investment in AI were bolstered. There could be a trickle-down effect to other infrastructure suppliers.
What it means for the stocks?
Coherent is a maker of transceivers used by data centers to connect the AI and machine learning servers to the network. Credo is an AI governance company that helps enterprises streamline AI adoption by implementing and automating AI oversight, AI risk management, and compliance. Lumentum is a leading provider of optical and photonic products used in data center connectivity.
While there is the potential to derive some benefit if their products are selected for use by Stargate, competition in their respective markets is intense and other bigger, better financed suppliers could be chosen. Being able to provide innovative product at scale will be key determining factor in winning contracts.
The trio of stocks are rising more on speculation than anything grounded in their individual potential. Exact details surrounding the project are still unclear as the plans and the vision for what Stargate seeks to achieve have yet to be announced.
Key takeaway
Not everyone is sold on the project, notably Elon Musk. In a series of dismissive posts on X, Musk said despite claims that SoftBank is bankrolling the venture, “they don’t actually have the money,” pointing out, “SoftBank has well under $10B secured. I have that on good authority.”
It is certainly an ambitious plan, and SoftBank CEO Masayoshi Son committed last month to investing $100 billion in the U.S. But investors shouldn’t put the cart before the horse.
Coherent, Credo Technologies, and Lumentum Holdings are rising on hope, not facts. As a result, expect their stocks to not hold onto the gains very long until more concrete news comes out.
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