Analysis of the U.S. AI Market Valuation and Contagion Risk for Indonesian Equities

• Semiconductor and Hardware: This foundational layer is dominated by NVIDIA (NVDA), the primary supplier of Graphics Processing Units (GPUs) essential for AI model training. Its market position has driven its valuation past $5 trillion. Other key players include Advanced Micro Devices (AMD) and design/hardware firms like Broadcom (AVGO).
• Cloud Hyperscalers and Foundational Models: This segment provides the large-scale infrastructure and develops the core Large Language Models (LLMs). It includes Microsoft (MSFT), with a $4 trillion valuation amplified by its deep integration with OpenAI; Alphabet (GOOGL), valued at over $3 trillion and leveraging its Vertex AI platform; Amazon (AMZN), valued at $2.37 trillion via its dominant AWS cloud services; and Meta Platforms (META).
• Application and Software: This layer consists of companies applying AI to enterprise data, such as Palantir Technologies (PLTR).
• Private Market: The ecosystem is anchored by private ventures, most notably OpenAI, which is reportedly contemplating a $1 trillion initial public offering.

This concentration of value is supported by an unprecedented wave of capital expenditure (CapEx). Big Tech firms are projected to invest over $400 billion in AI infrastructure in 2025 alone. Specific commitments include Amazon’s planned $100 billion, Alphabet’s revised guidance of $91-93 billion, and Microsoft’s $80 billion. The total planned investment across the sector is estimated at $5.2 trillion over the next five years.

The “Circularity” of Capital

These valuation and spending figures are not independent; they are linked by a “tangle of AI deals” that creates a “circularity” of capital flows. This is most evident with OpenAI, which has reportedly committed to spending $250 billion on Microsoft Azure, $300 billion on Oracle cloud services, and $38 billion on Amazon Web Services. In turn, NVDA has committed to investing $100 billion in OpenAI. This dynamic creates a closed loop where capital is circulated among the core players, inflating the revenue and justifying the massive CapEx budgets of the cloud providers, which in turn reinforces their own market valuations.