The euphoria for artificial intelligence firms continued to gain momentum. Seven technology startups now command a valuation of $1.3 trillion.
Sam Altman’s OpenAI leads the AI valuation expansion. The firm is worth $500 billion. Last week, the media incorrectly reported that Tesla (TSLA) CEO Elon Musk raised $10 billion for its xAI firm. That would imply a $200 billion valuation. Musk posted on X that the firm "is not raising any capital right now."
Both xAI and OpenAI are losing money. Losses will continue to mount as capital expenditures increase. Speculators are betting that the market is big enough for AI firms to sell ~ $10 - $200 per month subscriptions. Unfortunately, Baidu (BIDU), Tencent (TCEHY), and Alibaba (BABA) are building AI models.
Chinese tech firms claimed they built their AI cheaply. Look, for example, at DeepSeek. It claimed the model cost $6 million to create. However, experts contend that it costs $1.6 billion to build. Chip suppliers like Nvidia (NVDA) rely on companies paying a premium for the latest hardware to sustain their profit margins.
Any news of companies finding ways to build large language models at a low cost is bad news for the industry.
Stocks to watch in the AI market include Arista Networks (ANET), Taiwan Semiconductor (TSM), Nvidia, Advanced Micro Devices (AMD), and Intel (INTC). Software firms to watch include Alphabet (GOOG) and Microsoft (MSFT).
