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Proximity to artificial intelligence is more lucrative than ever. Listed AI software companies trade at 2.5 times the multiple of non-AI ones, according to investor Theory Ventures. Those backed by tech giants are making some of the biggest leaps in market value.

The equity portfolios of AI chip designer Nvidia and Alphabet could be viewed as an insider’s guide to AI. Their 13F regulatory filings, required of all investors with over $100mn in assets, show the public companies the pair invest in. Both have a stake in British semiconductor designer Arm, which Nvidia attempted to buy in 2021 for $40bn and is now valued at $132bn. 

Because it does not design AI-specific chips, there have been some squabbles about Arm’s inclusion in the AI boom. It is one of the more expensive stocks in the sector too, priced at 40 times forecast revenue. That is twice as high as the multiple Nvidia commands. Stakes held by Nvidia and Alphabet offer a counterargument. Both work with Arm and have first hand experience of its value. They know what demand there is for processor designs able to handle large workloads.

Nvidia’s other AI stock investments range from driverless cars to voice recognition tech. It seems as if the company (like everyone else) is still unsure where exactly AI implementation will pay off.

True, these are not all recent bets. Nvidia invested in autonomous truck company TuSimple, which uses Nvidia GPUs, six years ago for example. This year, TuSimple announced plans to delist from the Nasdaq after its share price fell from $40 in 2021 to less than $1. It blames rising interest rates for changing investor interest in “pre-commercialisation” tech companies, ie companies that make few sales. The general AI frenzy meant, despite all this, the share price rose by a third this month, after Nvidia’s 13F was released.

The AI start-ups that tech giants are backing have a clearer objective. These deals, which are more recent, can be summarised as an attempt to ensure that Microsoft and OpenAI do not control distribution of generative AI.

Qualcomm invests in OpenAI rival Anthropic. So do Amazon and Google. Nvidia, Alphabet, Salesforce and Intel back Hugging Face, an open source alternative to OpenAI. Nvidia also invests in Cohere and Perplexity. Microsoft has countered by expanding beyond OpenAI with a stake in French start-up Mistral, a large language model developer.

The risk of following these playbooks is raised valuations. Last year, AI start-ups accounted for more newly-minted unicorns than any other sector. All are intended to keep Big Tech’s hierarchy intact in the face of new technology.