AI Market Update: Q1 2024 in Review

Tech giants race for AI dominance

Tech enthusiasm was strong in January, with Microsoft (NASDAQ:MSFT) hitting a US$3 trillion valuation and Google parent company Alphabet (NASDAQ:GOOGL) approaching its all-time highest close on January 24.

AI has been a key component in these moves. In January, Google demonstrated its prominence in the sector when it revealed at the Unpacked conference that Samsung (KRX:005930) would be using Google’s Gemini AI for its new Galaxy S24 series. Google previously integrated Gemini with its flagship Pixel 8 Pro phones at the end of 2023.

These developments, along with competitor Apple’s (NASDAQ:AAPL) ongoing investments in AI research to develop new product offerings, highlight the increasing prominence of AI in consumer electronics.

As February began, attention shifted to NVIDIA (NASDAQ:NVDA). Reuters reported that the company was looking to develop a US$30 billion business unit to expand into the custom chip market in an effort to maintain its competitive edge in the AI sector. However, the more noteworthy event was the February 21 release of NVIDIA's latest results.

In the days leading up to the release, Bloomberg reported that almost US$200 billion in market value was riding on NVIDIA's results. This led analysts at Goldman Sachs (NYSE:GS) to call NVIDIA “the most important stock on planet Earth."

Ultimately, company reported a record US$22.1 billion in revenue in Q4, 22 percent higher than the prior quarter and 265 percent higher than Q4 2022. Its share price surged over 16 percent and remained high throughout the quarter.

Other tech companies have been stepping up their efforts to compete with NVIDIA's stellar performance and secure their place in the AI market. Microsoft (NASDAQ:MSFT) is reportedly developing an AI network card to improve the performance of its Maia AI chip, steering the company away from its reliance on NVIDIA. Additionally, Microsoft has partnered with OpenAI’s France-based competitor Mistral AI to bring its open-source AI models to Azure cloud users. The company is also collaborating with media platform Semafor to refine the responsible use of AI in journalism.

Moreover, Bloomberg reported that SoftBank Group’s (TSE:9984) CEO is seeking US$100 billion — with most of the funds coming from Middle Eastern institutions — for a potential venture into the chipmaking industry to complement semiconductor company Arm Holdings (NASDAQ:ARM), in which SoftBank holds a majority stake.

In January, OpenAI’s Sam Altman fueled speculation about a potential expansion into semiconductor manufacturing with a visit to South Korea, where he met with executives from Samsung and SK Hynix (KRX:000660).

Additionally, the Biden administration granted US$1.5 billion to semiconductor company Global Foundries (NASDAQ:GFS) as part of the CHIPS and Science Act, demonstrating the government's commitment to domestic production of advanced semiconductor chips. The grant will finance the construction of a new facility, as well as the expansion of an existing one in Malta, New York, plus upgrades to the firm's longest-operating facility in Vermont.

February also saw Google’s establishment of a new AI research hub in Paris.

Investor takeaway

With the first quarter of 2024 in the books, the AI landscape reflects both progress and ongoing challenges.

Promising moves from tech heavyweights and innovative new players are driving the sector forward, but concerns about a bubble in the industry persist, along with ethical considerations. Even so, many experts remain confident about AI's potential, and see a path to a future where this technology serves humanity's goals.