US Tech Giants Add $2.4Trillion on AI Hype
If there was ever any doubt about artificial intelligence potential, then the $2.4 trillion US tech giants added to their market caps should quell any concerns. The focus is on generative AI; US tech giants have been on a roll, posting double-digit percentage gains in share price values owing to their innovations and solutions around the groundbreaking technology.
Artificial Intelligence Hype
Apple, Microsoft, Alphabet, and Amazon are some of the companies that have posted an average of 36% in share price gains as investors turned to them for exposure to generative AI. Nevertheless, Nvidia has been the biggest beneficiary, going by the 200% plus rally as the focus shifted to its graphics processing units used to enable AI innovations.
The chip giant has already joined the trillion-dollar club, having become a Wall Street darling on AI hype. Despite the stock appearing overvalued, investors have continued to add it to their portfolios in anticipation of further gains as the AI revolution is just starting. The company’s chips are in high demand as they power many advanced generative AI models that produce new content from the volume of training data.
The gains posted by US tech giants amid the generative AI hype have helped propel tech-heavy NASDAQ 100 to 80% of its all-time highs. It marks the fastest pence back to near-all-time high levels than t after the dot-com bust. Nevertheless, valuation concerns are becoming louder by the day as public multiples for most tech companies are back to 10 10-year Covid average of 6.1 times 12 months’ revenue.
Amid the valuation concerns, tech companies exposed to revolutionary technology continue to attract strong interest. The strong interest comes from the growing buzz about generative AI tools like OpenAI’s ChatGPT and Google’s Bard and their potential impact on the digital world.
AI Funding Deals
On the other hand, the US continues to lead the pack on artificial intelligence funding deals. OpenAI has been one of the most sought-after startups, attracting $10 billion in investment from Microsoft. Inflection is another company that has raised $1.3 billion as it continues to work on innovations tied to AI.
In Europe, France is in the driver’s seat on AI funding deals with three of the largest funding rounds. Hugging Face raised $235 million, followed by Poolside with $126 million, and Mistral AI having raised $113 million. Europe is becoming a hotbed of AI, with 40% of new unicorns all working on generative AI.
The billions of dollars raised by AI startups come on the heels of fundraising dropping significantly as investors remain wary. Companies no longer spend big on new projects or acquisitions as cost cuts remain a top priority. For instance, there were only ten transactions involving large-cap techy companies this year, considering there were 26 deals in 2022 and 27 in 2021.
Tech companies have prioritized cost cuts to navigate the high-interest rate environment and uncertainty over the economic outlook. Nevertheless, some tech companies have prioritized growth and expansion over short-term profits. Massive investments in AI innovations.
