Alibaba and Nvidia Demonstrate Immediate Market Rewards for AI Investments

The excitement surrounding artificial intelligence is leading to a peculiar new equation in the stock market: Announcements of significant AI investments often result in even more substantial increases in the market value of the investing companies.

Consider Nvidia Corp, which recently revealed it would acquire a $5 billion stake in Intel Corp., and on Monday, detailed plans to invest as much as $100 billion in OpenAI, the developer behind ChatGPT. Following the announcements, Nvidia added over $320 billion in market value within just three trading days — three times the amount it plans to spend across both deals.

On Wednesday, Alibaba Group Holding’s US shares surged by as much as 10% after the company disclosed it would allocate more to AI than the previously established target of $50 billion. Although the exact amount of this additional spending was not disclosed, it increased Alibaba’s market capitalization by over $35 billion.

Typically, substantial corporate spending announcements do not lead to immediate rewards in the stock market. However, these actions demonstrate that investors remain eager for AI-related investments, readily buying shares of companies that are heavily investing in data centers to assert their leadership in the field. The dramatic market value increases occur despite the fact that only a few companies have been able to demonstrate significant returns from their investments thus far.

“The market is convinced that leadership in AI will require substantial investment,” stated Tejas Dessai, director of thematic research at Global X Management Company LLC. “Moreover, the market also believes that profits can be generated from this opportunity if you possess the scale and infrastructure to address the demand.”

Other companies experiencing gains this year after committing to spend over $317 billion collectively on AI include Meta Platforms Inc., Microsoft Corp, Alphabet, and Amazon.com, whose increases significantly contributed to the S&P 500 Index’s rally in 2025. The market value added to these companies this year far exceeds their planned expenditures: together, they have seen their market capitalizations rise by approximately $1.8 trillion.

Oracle Corp. also stands to benefit from increased AI spending and high-profile collaborations with entities such as OpenAI, SoftBank Group Corp., and Meta Platforms. The firm is expected to invest $35 billion in capital expenditures in fiscal year 2026, with plans to elevate that to $65 billion by fiscal year 2029. Its stock has risen by more than 80% this year, adding nearly $390 billion to its market value.

The market’s enthusiasm for data center investments persists despite growing concerns that recent agreements, such as the one between Nvidia and OpenAI, might indicate a bubble due to their interconnected nature: Nvidia is, in effect, investing in its customers.

With major tech stocks comprising a larger segment of the market than ever, this heightened concentration risk could lead to significant downward pressure on benchmark indexes if any of them falter.

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

‘Bubble environment’

The activity in Nvidia’s stock, in particular, reflects “atypical market behavior that signifies a bubble environment,” stated Michael O’Rourke, chief market strategist at Jonestrading, noting that the firm’s $4.3 trillion market capitalization means even minor fluctuations result in billions in value gained or lost.

Nonetheless, whether in a bubble or not, many on Wall Street anticipate that the trend will persist, at least temporarily. Investors have signaled their strong interest in AI initiatives, particularly with companies willing to invest heavily as a competitive race unfolds.

Despite skepticism in the past regarding technological infrastructure investments due to unfavorable outcomes like the dot-com bubble, there is currently more support for innovations that have been demonstrably transformative.

“The market has been exceptionally accommodating, allowing these companies to embark on this investment drive, which again reinforces the narrative that the market genuinely believes AI presents a fundamental opportunity not only for these companies but for the broader economy,” Dessai from Global X remarked. “The greatest risk presently lies in underinvestment, especially if you’re a market leader.”

© 2025 Bloomberg

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