AI innovation is healthy and driving immense profits now.

Barely a day goes by without excitement over artificial intelligence (ai) sending another company’s market value through the roof. This month the share price of Dell, a hardware-maker, jumped by over 30% in a day because of hopes that ai will boost sales. Days later Together ai, a cloud-computing startup, raised new funding at a valuation of $1.3bn, up from $500m in November. One of its investors is Nvidia, a maker of ai chips that is itself on an extended bull run. Before the launch in November 2022 of Chatgpt, a “generative” ai that responds to queries in uncannily humanlike ways, its market value was about $300bn, similar to that of Home Depot, a home-improvement chain. Today it is $2.3trn, $500bn or so shy of Apple’s.

The relentless stream of ai headlines makes it hard to get a sense of which businesses are real winners in the ai boom—and which will win in the longer run. To help answer this question The Economist has looked where value has accrued so far and how this tallies with the expected sales of products and services in the ai “stack”, as technologists call the various layers of hardware and software on which ai relies to work its magic. On March 18th many companies up and down the stack descended on San Jose for a four-day jamboree hosted by Nvidia. With talks on everything from robotics to drug discovery, the shindig showed off the latest ai innovations. It highlighted furious competition between firms within layers of the stack and, increasingly, between them.

chart: the economist

We examined four of these layers and the firms that inhabit them: ai-powered applications sold outside the stack; the ai models themselves, such as gpt-4, the brain behind Chatgpt, and repositories of them (for example, Hugging Face); the cloud-computing platforms which host many of these models and some of the applications (Amazon Web Services, Google Cloud Platform, Microsoft Azure); and the hardware, such as semiconductors (made by firms such as amd, Intel and Nvidia), servers (Dell) and networking gear (Arista), responsible for the clouds’ computing power (see chart 1).

Technological breakthroughs tend to elevate new tech giants. The pc boom in the 1980s and 1990s propelled Microsoft, which made the Windows operating system, and Intel, which manufactured the chips needed to run it, to the top of the corporate pecking order. By the 2000s “Wintel” was capturing four-fifths of the operating profits from the pc industry, according to Jefferies, an investment bank. The smartphone era did the same to Apple. A few years after it launched the iPhone in 2007, it was raking in more than half of handset-makers’ global operating profits.

The world is still in the early days of the generative-ai epoch. Even so, it has already been immensely lucrative. All told, the 100 or so companies that we examined have together created $8trn in value for their owners since its start—which, for the purposes of this article, we define as October 2022, just before the launch of Chatgpt (see chart 2). Not all these gains are the result of the ai frenzy—stockmarkets have been on a broader tear of late—but many are.