Defying Gravity

AI investment has become a macroeconomic fact in the West, and the forces that make it impossible to escape are the same ones that have stopped the market from pricing it

- BY SHUBHRANSHU SINGH BY SHUBHRANSHU SINGH

When Elon Musk stood in a SpaceX hangar in Texas on June 12th and set the Nasdaq's trading day in motion, he ended it as the world’s first trillionaire. The flotation pulled in $75 billion, more than any listing before it, ahead of Saudi Aramco in 2019 and NTT back in 1987. The stock rose 19 per cent before the close, which put a price of roughly $2.1 trillion on the business. Take that in and pause.

SpaceX booked $18.7 billion of revenue last year and lost $4.9 billion in the process. Set those two figures side by side and sit with the gap, because that gap is the argument of this entire market.

The Gap is the Reality

For three years, the investing world treated artificial intelligence as a riddle to be solved from the outside. How big was the bubble, which trades would it ruin, and where were the winners hiding. Commentators of all kinds opined from end-of-humanity doom narratives to “it’s a bubble” valuation analysis. The show went on.

The larger shift was the one happening to the floor they were standing on. AI has stopped being one corporate theme among many and turned into something closer to a macroeconomic engine. Pimco has estimated that AI-related spending could add as much as $14 trillion to global investment over five years, a sum it puts at roughly an eighth of world output. The big American cloud companies are on course to pour something like $800 billion into AI data centres this year.

Kevin Warsh, newly installed at the Federal Reserve, has spoken of AI as a force that could dampen inflation and clear room to cut rates. Once a single theme begins to move output, prices and the cost of money, a portfolio can no longer treat it as optional. It turns into the climate everyone invests inside.

Elon Musk’s rocket are not alone in defying gravity. So are AI valuations.