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$2.8 trillion pours into leading AI companies’ market cap in 2023

$2.8 trillion pours into leading AI companies' market cap in 2023

The year 2023 is deemed a watershed moment for artificial intelligence (AI) as the sector continues to find applications across various fields. This burgeoning interest is underscored by the remarkable surge in market capitalization for leading AI companies, signifying a pivotal juncture in AI’s trajectory and emphasizing the industry’s immense potential.

In this line, data acquired and calculated by Finbold indicate that the leading 12 selected AI companies collectively experienced a whopping inflow of $2.86 trillion in market capitalization between January and November 2023. As of November 9, the total market cap for these companies stood at $7.28 trillion, compared to $4.41 trillion in January, a 65% growth. 

A breakdown of the companies shows that chipmaker Nvidia (NASDAQ: NVDA) recorded the highest growth rate, with an increase of 215.77% from $364.18 billion to $1.15 trillion. (NYSE: AI) has the second-highest growth of 152.82% from $1.23 billion to $3.11 billion. Splunk (NASDAQ: SPLK) ranks third with a current market cap of $24.72 billion, representing gains of  75.44%. 

Other notable companies include Amazon (NASDAQ: AMZN), with a growth of 71.31% from $856.94 billion to $1.46 trillion. Microsoft’s (NASDAQ: MSFT) market cap grew from $1.79 trillion to $2.69 trillion, representing a growth of 50.78%. Alphabet (NASDAQ: GOOGL) now has a market cap of $1.64 trillion, a growth of 43.22% from January’s $1.15 trillion.

Understanding the surge in AI companies’ market cap 

This surge in market capitalization is symbolic of AI technology, which profoundly impacts various industries despite being in the early stages. From healthcare and finance to automotive and entertainment, AI’s capabilities have proven indispensable, revolutionizing processes, enhancing decision-making, and driving innovation.

Notably, the AI wave was initiated by the buzz around generative AI tools like OpenAI’s ChatGPT and Google’s Bard. Beyond the hype, tangible progress in AI research and development has played a pivotal role in bolstering the market valuations of the involved companies. 

Breakthroughs in natural language processing, computer vision, and reinforcement learning have paved the way for applications once deemed impossible. This confluence of technological advancement and real-world impact has instilled confidence in investors, further fueling the market cap surge.

It is worth noting that these companies have recorded significant growth in capitalization in a year that has been considered challenging for the tech industry. They have had to overcome a slew of global obstacles, including the ongoing pandemic recovery, intermittent supply chain challenges, fluctuating interest rates, and economic complications linked to geopolitical situations. Despite the growth in capitalization, they are also working to find their place in the rapidly advancing pace of technology, particularly within the artificial intelligence realm.

Nvidia’s stands out among AI companies

Among the highlighted companies, Nvidia’s growth stands out, with the firm capitalizing on the AI boom to achieve the coveted $1 trillion market capitalization. The company has experienced a surge in demand for the processors essential for training the latest artificial intelligence models, making it the biggest beneficiary of this year’s industry upswing.

Leading cloud computing companies have announced the development of massive infrastructures based on Nvidia’s latest AI chips. Various tech groups have partnered with Nvidia to disseminate cutting-edge AI technology across every industry. However, amid the boom, the supply, rather than the demand, has become the primary constraint on the company’s short-term growth.

At the same time, as companies continue to experience increases in capitalization, it underscores the intense competition that exists between them. For example, Microsoft has seamlessly integrated OpenAI’s technology throughout its product portfolio, from its search engine, Bing, to its workplace productivity suite, Microsoft 365, and software coding platform, GitHub.

Alphabet has similarly incorporated AI into numerous products, including its flagship Pixel phones. Earlier this year, the company introduced its generative AI chatbot called Bard, positioning it in direct competition with ChatGPT.

Sustainability of AI boom 

The surge in market capitalization underlines investors’ keen interest in AI-related stocks, hinting at a potential paradigm shift akin to the historic gold rushes that gripped Wall Street.

Despite the notable rally in these stocks, they do not appear to be caught in a speculative bubble similar to the dot-com era. Instead, there’s a consensus that the AI sector requires more time to mature, exhibit more favorable price action, and ultimately demonstrate its ability to deliver profits for investors. This cautious optimism is grounded in the belief that we are still in the early stages of a burgeoning technology cycle, poised for further outperformance. This aligns with a previous Finbold report that indicated that the AI sector is set to become a trillion-dollar market. 

As this tidal wave of investment reshapes the AI landscape, the implications for the future are profound. The influx of capital will undoubtedly fuel further innovation, accelerate the development of groundbreaking technologies, and expand AI’s footprint into previously uncharted territories.

Moreover, this surge in market capitalization serves as a resounding vote of confidence in the potential of artificial intelligence to address complex challenges and drive economic growth. It solidifies AI’s position as a technological advancement and a cornerstone of the global economy.

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