AI Investments Spark Stock Surges: Alibaba Up 10%, NVIDIA Up 3200%

The recent surge in artificial intelligence (AI) investments has sparked a unique phenomenon in the U.S. stock market, where significant AI investment plans often lead to substantial increases in the market value of the investing companies. Alibaba, for instance, saw its U.S. stock surge by 10% on a Wednesday, following the announcement that its AI investments would exceed the initial target of 500 billion dollars set at the beginning of the year. Although the exact additional investment amount was not disclosed, this news boosted Alibaba's market value by over 350 billion dollars. The company's Hong Kong-listed shares had already risen by 50% in September, making it the best-performing stock in the Hang Seng Tech Index.

The company's decision to increase its AI investments and form a new partnership with NVIDIA contributed to the recent surge in its stock price, also lifting the morale of competitors and suppliers. Option trading data indicated that investors were increasingly betting on further gains in Alibaba's stock, which remained relatively low compared to global peers. This development has once again positioned Alibaba as one of the hottest tech stocks in China, with investors flocking back to the 420 billion dollar internet giant.

NVIDIA, another major player, announced plans to invest 50 billion dollars in Intel and 1000 billion dollars in OpenAI, the company behind ChatGPT. Within three trading days of these announcements, NVIDIA's market value increased by over 3200 billion dollars, tripling the expected total investment amount from these deals. Despite the fact that large-scale investment plans by major corporations typically do not yield immediate returns in the stock market, these moves indicate that investors remain eager to invest in AI-related ventures. They are willing to buy into companies that invest heavily in data centers, aiming to become leaders in the field. However, the significant market value increases are occurring in an environment where only a few companies can demonstrate substantial investment returns in their financial statements.

The market's belief in the necessity of substantial investments to lead in AI is evident. The market also trusts that companies with sufficient scale and infrastructure to meet these demands can profit from this opportunity. This year, companies like Meta, Microsoft, Alphabet, and Amazon, which have committed to investing over 3170 billion dollars in AI, have seen their stock prices rise. These companies' market value increases have significantly contributed to the rise of the S&P 500 index for 2025. The combined market value increase of these four companies far exceeds their planned investment amounts, totaling approximately 18000 billion dollars.

Oracle is another beneficiary of increased AI investments. The company has formed important partnerships with notable enterprises like OpenAI, SoftBank, and Meta, and has a promising earnings outlook. Oracle's capital expenditure is expected to reach 350 billion dollars by the 2026 fiscal year and 650 billion dollars by the 2029 fiscal year. The company's stock price has risen by over 80% this year, adding nearly 3900 billion dollars to its market value.

While there are growing concerns about potential market bubbles, as seen in recent high-profile transactions like NVIDIA's deal with OpenAI, the enthusiasm for data center construction remains high. This is because these transactions are cyclical, with NVIDIA essentially investing in its own customers. The increased concentration of the largest tech stocks in the market poses a risk, as any downward pressure on these stocks could lead to significant declines in benchmark indices.

Despite these concerns, many on Wall Street believe this trend is likely to continue, at least in the short term. Investors have shown clear interest in the ambitious AI goals of companies willing to invest heavily, fostering a competitive "arms race" in the industry. Historically, investments in technology infrastructure have faced skepticism due to past events like the dot-com bubble burst. However, there is now greater support for innovations that have proven to be transformative. The market has been very supportive of large-scale investments by these companies, reinforcing the belief that AI presents a foundational opportunity not just for these companies, but for the entire economy. The primary risk at present is underinvestment, particularly for companies leading their respective industries.