Burning $400 billion in a year - The AI war of the "Seven Sisters" in the US stock market

Author: Bu Shuqing

Source: Hard AI

A fierce AI battle is unfolding in Silicon Valley!

A report released by consulting firms Dealroom and Flow Partners shows that the global tech industry is entering a new innovation cycle led by AI and automation. The tech innovation cycle occurs roughly every twenty years, with the previous two cycles happening in the PC era (popularization of personal computers) and the internet era (including the shift to mobile devices and cloud computing).

In order to seize the initiative in this round of innovation cycle, tech giants are increasing their investments in AI.

The report points out that the "Seven Sisters" of US stocks, with a total market value of $14 trillion (approximately 32% of the S&P 500 index), are investing as much as $400 billion annually in AI and cloud infrastructure. These investments cover various areas from AI chips, large models, to humanoid robots, autonomous driving, AI healthcare, and more.

The most intense competition lies in the hardware and model layers of AI, with more and more tech giants encroaching on each other's "territory" to grab a share. For example, NVIDIA, a leader in the AI chip market, is facing a collective siege from peers turned customers, with Tesla, Microsoft, Google, and Amazon all developing their own AI chips.

In order to concentrate resources, they may even sacrifice other businesses. For instance, Meta recently shut down its enterprise collaboration product Workplace, which was once seen as a signal of its full pivot towards the metaverse and AI.

"Territory" Battle: From Mergers and Acquisitions to VC

In the past, acquisitions played a key role in the "territory" battle, but as regulatory scrutiny of mergers intensifies, tech giants are shifting more focus to venture capital.

The report indicates that in 2023, the "Seven Sisters" completed only 7 acquisitions but participated in 208 venture capital transactions.

So far this year, the "Seven Sisters" have invested $24.8 billion in AI companies through venture capital activities, surpassing the annual total venture capital amount in the UK, with star AI startups like OpenAI, Anthropic, Wayve being the most favored by the giants.

At the same time, the acquisition activities continue, with NVIDIA acquiring Israeli startups Run:AI and Deci AI for a total of $1 billion in May.

The activities of the "Seven Sisters" in the venture capital field have significantly increased, especially for those companies that have achieved a certain scale and performance but have not yet gone public. By 2023-2024, they have become the largest technology VC.

Most of the funds flow into large models and infrastructure, with an economic potential at the application layer reaching up to $50 trillion

Tech giants have layouts in various aspects of AI, but the current focus is still on foundational technology (large models) and infrastructure. The report shows:

• Most of the AI investments flow into the foundational layer, which supports the development of AI's underlying large model technology, such as OpenAI, Anthropic, Gemini, etc. This part of the investment accounts for about 75% of the total AI investment by tech giants.
• The cloud infrastructure layer accounts for about 42% of total AI investment, with major players being Google Cloud, Amazon Web Services (AWS), and Microsoft Azure.
• The computational layer investment accounts for 29%, with players including NVIDIA, Broadcom, and other chip and computing power suppliers.
• The application layer accounts for 32% of total AI investment, with major players including Waymo, Anthropic, etc.
• The ops layer investment accounts for 42%, with players like Hugging Face and Weights & Biases.
• The energy layer investment accounts for 5%, mainly focusing on clean energy generation technologies.

It is worth noting that AI investments are gradually shifting towards the application layer

There are abundant opportunities for AI applications. A report indicates that in healthcare, equipment, media, software cloud, climate, education, defense, mobile, and manufacturing industries, the economic potential of AI reaches $50 trillion.

Industry insiders point out that the ultimate goal of tech giants is to achieve Artificial General Intelligence (AGI) first. Although it is currently unclear how long it will take to achieve AGI, it is foreseeable that in this new cycle of innovation, AI will become a decisive factor in technological competition.