Alibaba and Nvidia Showcase Instant Market Benefits from AI Investments

The buzz around artificial intelligence is creating an unusual phenomenon in the stock market: Announcements regarding substantial AI investments frequently lead to even larger surges in the market value of the companies making these investments.

Take Nvidia Corp., for example, which recently announced plans to acquire a $5 billion stake in Intel Corp. and revealed intentions to invest up to $100 billion in OpenAI, the creators of ChatGPT. Following these declarations, Nvidia’s market value increased by over $320 billion in just three trading days — three times the amount it intends to allocate across both transactions.

On Wednesday, shares of Alibaba Group Holding in the US jumped by as much as 10% after the company revealed it would be increasing its AI investment beyond the previously set target of $50 billion. Although the exact figure for this additional investment wasn’t specified, it resulted in an increase of over $35 billion in Alibaba’s market capitalization.

Typically, significant corporate investment announcements do not yield immediate benefits in the stock market. However, these developments indicate that investors are enthusiastic about AI-related investments, eagerly purchasing shares from companies heavily investing in data centers to secure their leading position in the sector. The remarkable increases in market value occur despite the reality that only a handful of companies have been able to showcase significant returns on their investments so far.

“The market is convinced that leading in AI demands considerable investment,” noted Tejas Dessai, director of thematic research at Global X Management Company LLC. “Furthermore, the market believes that profits can be generated from this opportunity if one possesses the scale and infrastructure to meet the demand.”

Other firms reaping benefits this year after pledging over $317 billion collectively towards AI include Meta Platforms Inc., Microsoft Corp, Alphabet, and Amazon.com, whose gains have significantly bolstered the S&P 500 Index’s rally in 2025. The market value accrued by these companies this year greatly surpasses their planned investments: collectively, they have experienced a rise in market capitalizations by around $1.8 trillion.

Oracle Corp. is also poised to gain from the surge in AI spending and high-profile partnerships with organizations such as OpenAI, SoftBank Group Corp., and Meta Platforms. The company is projected to invest $35 billion in capital expenditures in fiscal year 2026, with ambitions to raise that to $65 billion by fiscal year 2029. Its stock has risen by over 80% this year, contributing nearly $390 billion to its market value.

The market’s enthusiasm for data center investments endures despite rising worries that recent deals, such as the Nvidia and OpenAI partnership, could indicate a bubble due to their interrelated nature: Nvidia is essentially investing in its customers.

With major tech stocks taking up a more substantial portion of the market than ever, this heightened concentration risk could exert significant downward pressure on benchmark indexes if any of these firms stumble.

“We are clearly navigating uncharted waters,” remarked Louis Navellier, chief investment officer of Navellier & Associates, in a note to clients discussing concentration risks and noting that the US stock market’s value has now exceeded double that of the nation’s economy.

‘Bubble environment’

The movement in Nvidia’s stock, in particular, reflects “unusual market behavior that indicates a bubble environment,” stated Michael O’Rourke, chief market strategist at Jonestrading, pointing out that the firm’s $4.3 trillion market capitalization means even minor fluctuations lead to billions in value gained or lost.

Nonetheless, whether in a bubble or not, many on Wall Street expect that this trend will continue, at least for the time being. Investors have indicated a strong inclination towards AI initiatives, especially with companies ready to heavily invest as the competitive race heats up.

Despite past skepticism surrounding technological infrastructure investments due to disastrous outcomes like the dot-com bubble, there is now greater backing for innovations that have proven transformative.

“The market has been exceptionally accommodating, allowing these companies to embark on this investment surge, which reinforces the notion that the market genuinely believes AI presents a fundamental opportunity not just for these firms but for the broader economy,” remarked Dessai from Global X. “The biggest risk currently lies in underinvestment, particularly if one aspires to be a market leader.”

© 2025 Bloomberg

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