Alibaba, Nvidia show stock market is instantly rewarding AI spending

NEW YORK - The euphoria towards artificial intelligence is creating a strange kind of new maths in the stock market: Plans for massive AI investments often lead to even larger increases in market value for the companies writing the cheques. 

Take Nvidia, which last week said it will

buy a US$5 billion (S$6.4 billion) stake in rival Intel

and on Sept 22 announced plans to

invest up to US$100 billion in ChatGPT creator OpenAI

.

The chipmaker added more than US$320 billion in market value in the three trading days when the plans were announced – triple the amount the company is expected to spend under both agreements. 

Then on Sept 24, Alibaba Group Holding’s US shares jumped as much as 10 per cent after the company said it would spend even more on AI than a US$50 billion target set earlier in 2025.

While the total amount of additional anticipated spending was not even announced, the news swelled Alibaba’s market capitalisation by more than US$35 billion. 

While massive corporate spending plans typically have not tended to be instantly rewarded in the stock market, these moves highlight that investors are still clamouring for all things AI and they are happy to keep piling into shares of companies spending big on data centres to position themselves as leaders in the space.

The massive increases in market value come even as only a few companies have been able to show a material return on the investment in their financials.

“The market is convinced that leadership in AI is going to take a lot of investment,” said Mr Tejas Dessai, director of thematic research at Global X Management Company. “And the market is also convinced that there are profits that can be earned out of this opportunity as long as you have the scale and the infrastructure to really service all this demand.”

Other stocks that have seen a lift in 2025 after pledging to spend more than US$317 billion combined on AI include Meta Platforms, Microsoft, Alphabet and Amazon.com, whose gains account for a major part of the S&P 500 Index’s rally in 2025.

The amount of value added to the companies in 2025 far outstrips how much the group intends to spend: The four together have seen their market capitalisation boosted by about US$1.8 trillion. 

Oracle is another beneficiary of plans to boost spending on AI alongside high-profile partnerships with the likes of OpenAI, SoftBank Group and Meta as well as solid earnings outlooks.

The company is expected to spend US$35 billion on capital expenditures in fiscal year 2026, and increase that amount to US$65 billion by fiscal 2029.

The stock has risen by more than 80 per cent in 2025, adding nearly US$390 billion to its market value. 

The market enthusiasm towards data centre builds comes despite mounting concerns that recent deals, such as the one between Nvidia and OpenAI, potentially signal a bubble due to the circular nature of the agreements: Nvidia is essentially investing in its customers. 

And with the biggest technology stocks making up a larger portion of the market than ever, the increased concentration risk could mean any downside pressure on them could spark a nasty move lower in benchmark indexes. 

“We are clearly in uncharted waters,” Mr Louis Navellier, chief investment officer of Navellier & Associates, wrote in a note to clients describing the concentration risk and the fact that the value of the US stock market is now more than double the size of the nation’s economy.

‘Bubble environment’

The movement in Nvidia’s stock especially is “atypical market behaviour that is representative of the bubble environment,” said Mr Michael O’Rourke, chief market strategist at Jonestrading, adding that the company’s US$4.3 trillion market capitalisation means that even small moves in shares constitute billions of dollars in value gained or lost. 

Still, bubble or not, many on Wall Street believe that the trend is likely to continue, at least in the near future. Investors have made it clear they have an appetite for AI ambitions and the companies that are willing to spend big as an arms race of sorts emerges.

While technological infrastructure investment has drawn scepticism in the past due to unfavourable outcomes such as the bursting of the dot-com bubble, there is more support today for innovations that have already proven to be transformational. 

“The market has been super friendly to allow these companies to go on this investment spree, which again ties back to the story that the market really believes that AI presents a foundational opportunity not only for these companies but for the broader economy,” Global X’s Mr Dessai said. “The biggest risk right now is underspending, especially if you are a category leader.” BLOOMBERG