A stark paradox is emerging in AI markets: while Microsoft and Nvidia just committed a staggering $15 billion to Anthropic, pushing the ChatGPT rival's valuation to $350 billion, public investors are fleeing AI stocks en masse. The S&P 500 just posted its fourth consecutive decline - the longest streak since August - driven by tumbling tech giants that can't seem to convince Wall Street their AI bets will pay off.
The AI investment landscape is revealing a fascinating split personality. Corporate treasuries keep opening wider for AI ventures, but public market investors are slamming the exits on the same companies making those bets.
Microsoft announced Tuesday it's investing up to $5 billion in Anthropic, while Nvidia committed another $10 billion to the OpenAI competitor. The deal follows a predictable pattern that's becoming almost comical in AI circles - Anthropic committed to buying compute power from its two newest stakeholders, creating what industry observers call a 'left hand scratching the right' scenario.
This circular funding model has become the dominant theme across AI investments. Company X invests in Company Y, then Company Y purchases services from Company X, creating a closed loop of capital that makes valuations look impressive on paper but raises questions about genuine market demand outside the tech ecosystem.
The Anthropic deal values the AI startup at around $350 billion according to sources familiar with the matter, a massive jump that reflects the continued corporate appetite for AI assets. But public markets are telling a different story entirely.
Nvidia shares tumbled Tuesday alongside other AI heavyweights Amazon and Microsoft, dragging the S&P 500 to its fourth consecutive decline - the longest losing streak since August. CFRA's chief investment strategist Sam Stovall calls Nvidia 'the top company within the top industry within the top sector,' making its performance a crucial bellwether for the entire AI investment thesis.
The timing couldn't be more critical. Nvidia reports earnings Wednesday, and if the chipmaker fails to meet sky-high investor expectations, the market selloff could accelerate. Investors have been burned before by inflated AI promises, and they're clearly demanding proof that these massive investments will generate actual returns rather than just impressive press releases.
Meanwhile, Google tried to shift the narrative from financial engineering to actual innovation, unveiling Gemini 3, its latest AI model. CEO Sundar Pichai promised the new system will trade 'cliché and flattery for genuine insight' and require 'less prompting' for desired answers. The update arrives eight months after Gemini 2.5 launched, highlighting the breakneck pace of AI model development.
