Latest news with #DeepSeek-inspired
Business Insider
3 days ago
- Business
- Business Insider
Six companies, one coast, $17 trillion
$4 trillion is the GDP of Japan, according to the World Bank. Nvidia is not far behind Germany, the third-largest economy in the world. This is a single corporation with only about 36,000 employees. Why is Nvidia so valuable? After a DeepSeek-inspired freakout earlier this year, the industry now thinks AI models probably need even more Nvidia GPUs and related gear. New types of "reasoning" models are especially expensive to run, which means extra demand for Nvidia's wares. Who buys all this stuff? Mainly cloud providers, such as Amazon, Microsoft, and Google, along with other Big Tech and AI companies, such as Meta. They also compete with Nvidia, so I call them frenemies. Add up the market value of these four giants and you get to about $10 trillion. Throw Apple and Nvidia into that mix, and you're over $17 trillion — approaching China's GDP. Just from six companies based in two medium-sized urban hubs on the northwest coast of the US. This compares a "flow" with an asset, so I'm risking a lecture from journalism schools I never attended, but it gives you an idea of the financial heft of these private entities. There are other ways to comprehend their size: Profit: Yeah, I know, so old-fashioned! The net income of these six companies totalled almost $500 billion in 2024. That's well over half the US annual defense budget. Capex: Meta, Microsoft, Amazon, and Google will spend about $325 billion this year, mostly on AI data centers. Then there's Project Stargate, involving OpenAI, Oracle, and others, which is investing at least $100 billion. That rivals the (inflation-adjusted) cost of the US Interstate highway system, which took more than three decades to build.
Business Insider
3 days ago
- Business
- Business Insider
Six companies, one coast, $17 trillion
Nvidia became the first $4 trillion company this week. The moment reminded me of something my tech friend mentioned before he moved to the UK earlier this year: There have never been companies like these. $4 trillion is the GDP of Japan, according to the World Bank. Nvidia is not far behind Germany, the third-largest economy in the world. This is a single corporation with only about 36,000 employees. Why is Nvidia so valuable? After a DeepSeek-inspired freakout earlier this year, the industry now thinks AI models probably need even more Nvidia GPUs and related gear. New types of "reasoning" models are especially expensive to run, which means extra demand for Nvidia's wares. Who buys all this stuff? Mainly cloud providers, such as Amazon, Microsoft, and Google, along with other Big Tech and AI companies, such as Meta. They also compete with Nvidia, so I call them frenemies. Add up the market value of these four giants and you get to about $10 trillion. Throw Apple and Nvidia into that mix, and you're over $17 trillion — approaching China's GDP. Just from six companies based in two medium-sized urban hubs on the northwest coast of the US. This compares a "flow" with an asset, so I'm risking a lecture from journalism schools I never attended, but it gives you an idea of the financial heft of these private entities. There are other ways to comprehend their size: Profit: Yeah, I know, so old-fashioned! The net income of these six companies totalled almost $500 billion in 2024. That's well over half the US annual defense budget. Capex: Meta, Microsoft, Amazon, and Google will spend about $325 billion this year, mostly on AI data centers. Then there's Project Stargate, involving OpenAI, Oracle, and others, which is investing at least $100 billion. That rivals the (inflation-adjusted) cost of the US Interstate highway system, which took more than three decades to build. Employee wealth: Most of these companies don't employ that many people, relatively speaking. Thirty-six thousand workers and a $4 trillion valuation represent an unprecedented concentration of wealth.
Yahoo
16-05-2025
- Business
- Yahoo
Alibaba's Letdown Tempers the Outlook for China's Tech Revival
(Bloomberg) — China's long-moribund tech sector started 2025 with a bang. As Coastline Erodes, One California City Considers 'Retreat Now' How a Highway Became San Francisco's Newest Park Maryland's Credit Rating Gets Downgraded as Governor Blames Trump Power-Hungry Data Centers Are Warming Homes in the Nordics NYC Commuters Brace for Chaos as NJ Transit Strike Looms DeepSeek came out of nowhere to challenge US supremacy in AI. Xi Jinping publicly celebrated the nation's most prominent entrepreneurs from Jack Ma to Liang Wenfeng. Shares in China's biggest tech firms staged their headiest rally since 2020. As the year's first quarterly earnings season got underway this week, investors got a wake-up call. Alibaba Group Holding Ltd. (BABA) shares plunged their most in more than a month Friday after disappointing investors who anointed the e-commerce leader one of the frontrunners in the DeepSeek-inspired AI boom. Inc. and Tencent Holdings Ltd. posted their fastest revenue growth since Covid-era heights — but that followed years of sub-par growth as they struggled with a Chinese downturn and a debilitating government crackdown. Both are on track for share losses since their reports. To be fair, Beijing's stimulus measures and a plethora of government spending incentives are propping up consumption — Alibaba's giant e-commerce operation outperformed in the March quarter, in one clear example. But with Meituan and PDD Holdings Inc. yet to report, the initial numbers suggest that investors might've gotten ahead of themselves. Chinese consumers and corporations are still holding back, wary of the turbulence brewing abroad as Donald Trump wages his trade war. At home, Alibaba, JD and Meituan — eager to rekindle growth — are sacrificing margins to expand into everything from faster delivery to food. All that is raising alarm bells for investors as the initial excitement over China's AI advances fades. 'This earnings season was a reminder that market expectations had perhaps run ahead of on-the-ground realities — both in terms of China's consumption recovery and the pace of AI monetization,' said Charu Chanana, chief investment strategist at Saxo Markets. 'China Big Tech is still navigating a transition phase, and the path to re-rating needs more than just efficiency gains. It needs a durable growth narrative,' she said. Before this week, analysts' earnings estimates for the Hang Seng Tech Index — which includes all the big names — had risen more than 30% in the past year, outpacing the broader market. China's tech sector has been seen as largely resistant to the impact of tariffs given its focus on local consumer spending. Mainland China accounts for 90% of Tencent's revenue, for example. At the same time, the trade war's broader macro impact has clouded the outlook for consumption. 'Broadly speaking, consumption appeared to be resilient domestically,' said Kok Hoong Wong, head of the institutional equity sales trading at Maybank Securities Pte. But 'investors remain cautious going forward, with headwinds expected from the ongoing trade woes.' Demand in the home market itself is still on shaky ground, and other internal factors are posing concerns for investors. JD has declared war on Meituan and Alibaba in food delivery. And JD and Alibaba are investing heavily in instant-delivery of everything from cosmetics to smartphones. The stage is set for a margin-eroding competition reminiscent of the go-go era that prompted a crackdown from Beijing. 'The on-the-ground reality in China is different — things are improving but it is a very slow consumption recovery,' said Sat Duhra, a portfolio manager at Janus Henderson Investors. China Tech Relief as Trade War Eases: Asia Earnings Week Ahead A cutthroat battle in retail isn't the only concern. For all the optimism around DeepSeek's breakthrough, it may take time for AI to deliver fruit. Analysts peppered Alibaba, Tencent and JD with questions about how they would deliver profits from the technology. Executives talked about how AI should elevate or enhance everything from advertising to design and shopping. But they turned cautious when quizzed about actual revenue impact. Tencent waved off worries that Chinese firms may run out of the Nvidia Corp. chips that are vital to AI development. Uncertainty remains over US plans to contain China's tech ascendancy through such measures as choking off the flow of high-end chips. Still, investors preach patience as Alibaba, Tencent and others build on DeepSeek's advances and weave AI into their already powerful offerings. That's particularly as Beijing throws its weight behind efforts from China's biggest tech firms and a clutch of ambitious startups to out-do the likes of OpenAI and Google. 'As the performance of DeepSeek has demonstrated, it would be somewhat naive to think China is not developing world-class technologies behind the scenes following years of investment and the drip feed announcements on this front has the ability to maintain interest in the sector,' said Janus Henderson's Duhra. —With assistance from Zheping Huang and Henry Ren. (Updates with comments in 12th paragraph. An earlier version corrected attribution in final paragraph.) Cartoon Network's Last Gasp DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race As Nuclear Power Makes a Comeback, South Korea Emerges a Winner Microsoft's CEO on How AI Will Remake Every Company, Including His Why Obesity Drugs Are Getting Cheaper — and Also More Expensive ©2025 Bloomberg L.P. 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Yahoo
16-05-2025
- Business
- Yahoo
Alibaba's Letdown Tempers the Outlook for China's Tech Revival
(Bloomberg) -- China's long-moribund tech sector started 2025 with a bang. As Coastline Erodes, One California City Considers 'Retreat Now' How a Highway Became San Francisco's Newest Park Maryland's Credit Rating Gets Downgraded as Governor Blames Trump Power-Hungry Data Centers Are Warming Homes in the Nordics NYC Commuters Brace for Chaos as NJ Transit Strike Looms DeepSeek came out of nowhere to challenge US supremacy in AI. Xi Jinping publicly celebrated the nation's most prominent entrepreneurs from Jack Ma to Liang Wenfeng. Shares in China's biggest tech firms staged their headiest rally since 2020. As the year's first quarterly earnings season got underway this week, investors got a wake-up call. Alibaba Group Holding Ltd. shares plunged their most in more than a month Friday after disappointing investors who anointed the e-commerce leader one of the frontrunners in the DeepSeek-inspired AI boom. Inc. and Tencent Holdings Ltd. posted their fastest revenue growth since Covid-era heights — but that followed years of sub-par growth as they struggled with a Chinese downturn and a debilitating government crackdown. Both are on track for share losses since their reports. To be fair, Beijing's stimulus measures and a plethora of government spending incentives are propping up consumption — Alibaba's giant e-commerce operation outperformed in the March quarter, in one clear example. But with Meituan and PDD Holdings Inc. yet to report, the initial numbers suggest that investors might've gotten ahead of themselves. Chinese consumers and corporations are still holding back, wary of the turbulence brewing abroad as Donald Trump wages his trade war. At home, Alibaba, JD and Meituan — eager to rekindle growth — are sacrificing margins to expand into everything from faster delivery to food. All that is raising alarm bells for investors as the initial excitement over China's AI advances fades. 'This earnings season was a reminder that market expectations had perhaps run ahead of on-the-ground realities — both in terms of China's consumption recovery and the pace of AI monetization,' said Charu Chanana, chief investment strategist at Saxo Markets. 'China Big Tech is still navigating a transition phase, and the path to re-rating needs more than just efficiency gains. It needs a durable growth narrative,' she said. Before this week, analysts' earnings estimates for the Hang Seng Tech Index — which includes all the big names — had risen more than 30% in the past year, outpacing the broader market. China's tech sector has been seen as largely resistant to the impact of tariffs given its focus on local consumer spending. Mainland China accounts for 90% of Tencent's revenue, for example. At the same time, the trade war's broader macro impact has clouded the outlook for consumption. 'Broadly speaking, consumption appeared to be resilient domestically,' said Kok Hoong Wong, head of the institutional equity sales trading at Maybank Securities Pte. But 'investors remain cautious going forward, with headwinds expected from the ongoing trade woes.' Demand in the home market itself is still on shaky ground, and other internal factors are posing concerns for investors. JD has declared war on Meituan and Alibaba in food delivery. And JD and Alibaba are investing heavily in instant-delivery of everything from cosmetics to smartphones. The stage is set for a margin-eroding competition reminiscent of the go-go era that prompted a crackdown from Beijing. 'The on-the-ground reality in China is different — things are improving but it is a very slow consumption recovery,' said Sat Duhra, a portfolio manager at Janus Henderson Investors. China Tech Relief as Trade War Eases: Asia Earnings Week Ahead A cutthroat battle in retail isn't the only concern. For all the optimism around DeepSeek's breakthrough, it may take time for AI to deliver fruit. Analysts peppered Alibaba, Tencent and JD with questions about how they would deliver profits from the technology. Executives talked about how AI should elevate or enhance everything from advertising to design and shopping. But they turned cautious when quizzed about actual revenue impact. Tencent waved off worries that Chinese firms may run out of the Nvidia Corp. chips that are vital to AI development. Uncertainty remains over US plans to contain China's tech ascendancy through such measures as choking off the flow of high-end chips. Still, investors preach patience as Alibaba, Tencent and others build on DeepSeek's advances and weave AI into their already powerful offerings. That's particularly as Beijing throws its weight behind efforts from China's biggest tech firms and a clutch of ambitious startups to out-do the likes of OpenAI and Google. 'As the performance of DeepSeek has demonstrated, it would be somewhat naive to think China is not developing world-class technologies behind the scenes following years of investment and the drip feed announcements on this front has the ability to maintain interest in the sector,' said Janus Henderson's Duhra. --With assistance from Zheping Huang and Henry Ren. (Updates with comments in 12th paragraph. An earlier version corrected attribution in final paragraph.) Cartoon Network's Last Gasp DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race As Nuclear Power Makes a Comeback, South Korea Emerges a Winner Microsoft's CEO on How AI Will Remake Every Company, Including His Why Obesity Drugs Are Getting Cheaper — and Also More Expensive ©2025 Bloomberg L.P.
Yahoo
27-03-2025
- Business
- Yahoo
Analysis-European investors say clock is ticking for AI adopters to deliver
By Lucy Raitano LONDON (Reuters) - European companies that are spending big on generative artificial intelligence need to start showing returns on their massive outlays by next year, or risk investors losing patience after they paid sky-high prices to join the market boom. AI-exposed stocks have been caught in a down-draught with broader equity markets in recent weeks as recession fears rise, adding to pressure on the sector since January, when the launch of low-cost Chinese AI model DeepSeek spurred a tech selloff. While many investors are bullish about Gen-AI's potential to boost productivity and profits, some are becoming more choosy, with a preference emerging for shares of companies adopting AI technology - like information group RELX and software firm SAP - over those supplying chips and other hardware to the industry. But they also say adopters need to start showing returns on the cash they've poured into the tech, or investors might cool on them too. PENDULUM SHIFTS TO THE ADOPTERS Chipmaker Nvidia has become almost synonymous with the AI boom. Even though its shares were hit hard by the rollout of DeepSeek's AI model, which requires fewer of the company's pricier chips, its stock is up 29% year on year. In Europe, there are fewer AI-exposed stocks to choose from than on Wall Street, but the trend is clear. Among hardware makers, chip equipment makers ASM International and BE Semiconductor are down a respective 25% and 20% since the January 24 DeepSeek-inspired selloff and amid U.S. recession fears. France's Schneider Electric, which provides electrical equipment to data centres, is down 14%. Among AI adopters, meanwhile, data group LSEG is down 5.5%, while RELX is just 1.6% lower. German business software group SAP is down 2.9% and on Monday overtook Novo Nordisk to become Europe's most valuable company. "Everyone was very narrowly invested in the AI enablers," said Gerry Fowler, head of European equity strategy at UBS. "With DeepSeek, because it cheapens AI so much, it means to some extent the markets are now looking at who are the outright beneficiaries of AI." PATIENCE HAS ITS LIMITS An internal survey published in January of over 100 Fidelity analysts found that almost 72% of them expected AI to have no impact on the profitability of the companies they cover in 2025. A lot more of the Fidelity analysts surveyed saw a positive impact over five years. Yet several European portfolio managers told Reuters their timeframe is shorter than that. "The market will lose patience with unfettered investment in AI unless it starts to see some return on investment out of the end of it," said Steve Wreford, lead portfolio manager on the global thematic equity team at Lazard Asset Management. Wreford said companies adopting AI are likely to be given a pass if they don't deliver much in 2025, when they are likely to roll out beta testing and trials, but that by 2026, investors need to start seeing a big impact on their top lines. AI-exposed stocks' valuations are relatively pricey. The STOXX 600 trades at an average price-to-earnings multiple of 17 times, while AI adopters like SAP and LSEG trade around 90-plus times, according to LSEG data. Bernie Ahkong, chief investment officer at hedge fund UBS O'Connor, said investors would begin questioning some companies' multiples if they don't deliver by the end of 2025. "During the year, management teams can always use the excuse, don't worry it's next quarter... for a multi-year theme. By the time it gets to Q4 and it hasn't come then ... people are not going to be patient anymore," he said. KILLER USE CASE The biggest risk in investing in AI generally for Paddy Flood, portfolio manager and global sector specialist, technology, at Schroders, is whether viable use cases emerge that people are actually willing to pay for. "To justify continued spending, we need to see concrete applications, whether a single 'killer' use case or a range of impactful ones." Fabio di Giansante, head of large European equities at Amundi, Europe's biggest asset manager, said the relative scarcity of European AI plays meant they already come at a premium, but that so far much of the news from the sector has been about orders and capital spending. "At some point you need to see the effect of those things benefiting the top line and margins," he said, adding that if the benefit is not as big as inferred by valuations, multiples might be reassessed. "This year could be the year this happens on a wide scale." Sign in to access your portfolio
