AI Portfolio

5 Stocks That Could Soar Thanks to Project Stargate: Fabrinet (FN), Vertiv (VRT), Celestica (CLS)

Eric Bleeker

Published: January 22, 2025 11:26 am

One story is driving stocks across the AI space higher today: the announcement of ‘Project Stargate.’ 

Stargate is a new company backed by Oracle, OpenAI, SoftBank, and MGX that aims to invest $500 billion in AI data centers across the next four years. It will be supported by technology partners like Microsoft (Nasdaq: MSFT) and NVIDIA (Nasdaq: NVDA) as well. 

Plenty of details on Stargate on unknown, but it does signal the ambition of AI companies continues to grow. Let’s look at 5 ‘AI infrastructure’ stocks that could see massive benefits from Stargate in the years to come. 

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5 AI Stocks That Could Rally After Stargate

As we noted above, there are still plenty of unknowns around Stargate. For example, we’re not sure how technology partnerships from companies like NVIDIA will work. Also, its unclear how much of Stargate is ‘branding’ on spending that was already going to happen. 

Yet, $500 billion across four years is a large number, and it adds to ambitious spending plans from large technology companies. 

For example, Amazon is expected to spend $85 billion, Microsoft $84 billion, Google $57 billion, Meta Platforms $48 billion, and Oracle $14 billion on capital expenditures this year mostly focused on AI data centers. Those numbers are before estimates will likely raise thanks to spending on Project Stargate. 

This spend will obviously go to buying AI chips from the likes of NVIDIA and Broadcom (Nasdaq: AVGO), but will also benefit things like networking stocks, companies that build the connections between data centers, and companies supplying critical supplies like liquid cooling. 

Let’s look at five of the top ideas that could jump thanks to Stargate. 

Vertiv 

Vertiv (NYSE: VRT) supplies a diversified portfolio of data center products. The company supplies uninterruptible power supplies (UPS), monitoring solutions, switch gears, and many more products focused on data centers. However, the most exciting part of Vertiv’s business is its liquid cooling. 

AI chips produce significantly more heat and increasingly can’t be air-cooled. This means liquid cooling is required on cutting-edge chips like NVIDIA’s Blackwell and Broadcom’s custom ASICs. Vertiv has long been a leader in this space and is seeing liquid cooling sales take off as this next generation of AI chips rolls out. 

The headline is that liquid cooling will provide much better margins for Vertiv. The company is projected to see sales jump to $9.24 billion in 2025 from an estimated $7.83 billion this year. That might not look like much, but thanks to the better margins in liquid cooling operating profits are projected to jump by 29%. 

And after Stargate, those estimates for sales in 2025 are likely too low. We announced a purchase of Vertiv in our $500,000 AI portfolio on October 26th and shares are up 33% since. 

Coherent 

The massive AI data centers being constructed by Stargate will feature tens or hundreds of thousands of GPUs networked together. Traditional networking gear like switches will get a boost from this, but that’s far from the only market to see a windfall. 

Currently, large AI clusters require 2.5 to 3.5 optical transceivers per GPU. This build-out is great news for Coherent (Nasdaq: COHR), which has a full array of optical products that includes a market-leading position in transceivers. In its most recent quarter, Coherent saw  57% of its revenue come from advanced networking technologies and that percentage should continue to grow in 2025. 

Shares of Coherent are up 43% since we first announced a buy intention on September 12th. 

Fabrinet

Let’s stick with stocks in the optical space. Fabrinet‘s (NYSE: FN) growth in the ‘datacom’ space isn’t quite as red-hot as Coherent. Last quarter Coherent saw 68% growth in its communications business whereas Fabrinet saw 36% growth. 

However, Fabrinet has its own strengths that make it a compelling buy. The company has a strong relationship with NVIDIA and should see strong tailwinds from NVIDIA’s Blackwell systems going into full production as the year progresses. Another area of strength for Fabrinet is a portfolio of products connecting data centers together (DCI, or data center interconnect). 

Overall, Fabrinet trades at about 30X earnings, which seems reasonable for a stock that could have a massive secular tailwind behind it with the growth of artificial intelligence. In addition, the company has a pristine balance sheet with close to a billion dollars in cash and little to no debt, which could fund investments as the race for AI supremacy heats up. 

Celestica 

Last May, I declared Celestica (NYSE: CLS) “The Best AI Stock to Buy in May.” Since that article was published, its stock is up 156%. That’s an impressive run for a stock almost no one has ever heard of! 

Celestica is classified as an ODM (original device manufacturer). Essentially, they help design the construction of high-end server racks in data centers. Years ago, Celestica focused its business on the cloud computing segment, and that turned out to be an absolutely brilliant pivot. One particularly lucrative relationship is with Google. As Google dives deeper into systems utilizing Broadcom‘s (Nasdaq: AVGO) TPUs, their relationship further tightens with Celestica. 

Unfortunately, we have yet to add shares of Celestica to our $500,000 AI Portfolio. However, it remains a stock firmly on our watchlist that could be added in the near future. 

Ciena 

Earlier we mentioned how an area of strength for Fabrinet is data center interconnects. Other stocks that could benefit from this trend include Marvell (Nasdaq: MRVL) and Ciena (Nasdaq: CIEN). 

Ciena has long been a leader in selling fiber optics to connect data centers together. If you take a look at its stock chart and extend it to the 1990s you’re going to see something wild. The company is still down more than 90% from its Dot-Com peak! 

Yet, enthusiasm around Ciena is far more warranted today. While sales to its traditional customers in telecom continue to lag, data center sales are absolutely on fire. In addition, recent breakthroughs in the AI space could put even more tailwinds at Ciena’s back. 

While many AI companies have talked recently about massive data centers housing a million or more GPUs networked together, recent breakthroughs around ‘reasoning’ models could push the space more toward smaller data centers with tens of thousands of GPUs networked for inferencing, but in a tight geographic space. These data centers would need a much higher amount of spending to data center interconnects, which would be a massive boost to Ciena. 

We announced our intention to add Ciena to our AI portfolio on November 22nd and shares are up 32% since. 

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