Why AI Stock Valuations Soared

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Tech CEOs have promised artificial intelligence will do many things for us. They’ve used these promises to justify billions of dollars of investment in building the language models and data centers needed to power AI.

Four of the world’s biggest tech companies – Meta, Amazon, Microsoft, and Google – have promised to collectively spend $380 billion this year in the AI space.

That spending has led to huge rallies in these companies’ stock prices. There are now hundreds of private AI companies with values – on paper – of over a billion dollars. And in October, the AI boom created the world’s first company worth $5 trillion – Nvidia.

So, is this spending justified? Do these companies’ stock values hint at a financial bubble in AI? Or is this situation different?

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