$400B Burned in AI Arms Race: US Stock 'Sisters' Battle

A grand AI battle is unfolding in Silicon Valley!

A recent report released by Dealroom and Flow Partners, service consulting agencies, indicates that the global technology industry is entering a new innovation cycle characterized by AI and automation. The cycle of technological innovation occurs roughly every twenty years, with the previous two cycles taking place during the PC era (the popularization of personal computers) and the internet era (including the shift to mobile devices and cloud computing).

To seize the initiative in this innovation cycle, tech giants are increasing their AI investments.

The report points out that the "Seven Sisters" of the US stock market, with a total market value of 14 trillion US dollars (accounting for about 32% of the S&P 500 index), invest as much as 400 billion US dollars annually in AI and cloud infrastructure. These investments cover a wide range of areas from AI chips, large models, to humanoid robots, autonomous driving, AI healthcare, and more.

The most intense competition is in the hardware and model layers of AI, with an increasing number of tech giants encroaching on each other's "territory." For instance, NVIDIA, which dominates the AI chip market, is facing a collective siege from peers and customers alike, with Tesla, Microsoft, Google, and Amazon all developing their own AI chips.

Advertisement

To concentrate resources, they may even sacrifice other businesses. For example, Meta recently closed its enterprise collaboration product Workplace, which was once seen as a signal of its full shift towards the metaverse and AI.

"Territory" battle: from M&A to VC

In the past, acquisitions played a key role in the "territory" battle, but as regulatory scrutiny of mergers and acquisitions has become increasingly strict, tech giants have turned more attention to venture capital.

The report notes 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 total annual venture capital investment in the UK. The most favored by the giants include star AI startups such as OpenAI, Anthropic, and Wayve.Acquisitions are still ongoing, 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 sector have significantly increased, especially for those companies that have reached a certain scale and performance but have not yet gone public. By 2023-2024, they have become the largest technology venture capital firms.

Most of the funds flow into large models and infrastructure, with the application layer's economic potential reaching $50 trillion.

Technology giants have laid out their strategies across all levels of AI, but the current focus is still on foundational technology (large models) and infrastructure. The report shows:

Most AI investments flow into the foundational layer, which supports the development of AI with underlying large model technologies such as OpenAI, Anthropic, and Gemini. This part of the investment accounts for about 75% of the total AI investment by technology giants.

The cloud infrastructure layer accounts for about 42% of the total AI investment, with Google Cloud, Amazon Web Services (AWS), and Microsoft Azure being the main players.

The computational layer accounts for 29% of the investment, with players including chip and computing power suppliers such as Nvidia and Broadcom.

The application layer accounts for 32% of the total AI investment, with main players including Waymo and Anthropic.

The operations support layer accounts for 42% of the investment, with players such as 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 investment is gradually shifting towards the application layer.

There are numerous opportunities for AI applications, with the report pointing out that in healthcare, equipment, media, software cloud, climate, education, defense, mobile, and manufacturing, the economic potential of AI reaches 50 trillion US dollars.

Industry insiders have indicated that the ultimate goal of tech giants is to be the first to achieve Artificial General Intelligence (AGI). Although it is currently unclear how much longer it will take to realize AGI, it is foreseeable that in this new round of innovation cycles, AI will become the decisive factor in technological competition.