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AI Stock Frenzy: Tesla’s $16.5B Chip Pact, OpenAI’s $40B Bet Spark Market Moves

July 29, 2025
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AI Stock Frenzy: Tesla’s $16.5B Chip Pact, OpenAI’s $40B Bet Spark Market Moves

Stock Market Moves and Earnings Highlights

AI-related stocks led notable market action as the week kicked off. Major indices hovered near record highs amid optimism in trade and tech – the Nasdaq and S&P 500 hit fresh peaks investopedia.com – and investors piled into AI plays. ServiceNow (NOW) shares jumped nearly 2% by mid-session Monday after a bullish analyst note from Cantor Fitzgerald touted its strong Q2 results and AI offerings nasdaq.com nasdaq.com. Analyst Thomas Blakey reiterated an “overweight” (buy) rating and a lofty $1,200 price target (about 22% above current levels) following ServiceNow’s earnings beat nasdaq.com. He highlighted surging adoption of the company’s new agentic AI products (like its Control Tower platform) and argued management’s raised guidance for next quarter might even be conservative given the momentum nasdaq.com.

Other AI-heavy stocks also saw high trading volumes and gains. For example, Super Micro Computer (SMCI) – which supplies AI-focused server hardware – rose about $4.16 to $58.63 on Monday, while enterprise software leader ServiceNow rallied roughly $13.8 to $982.6 by the close marketbeat.com. Chipmaker Qualcomm, cloud giant Salesforce, and networking firm Arista Networks were likewise among the top AI stocks of the day, reflecting sustained investor appetite in the sector marketbeat.com. Meanwhile, big-cap tech earnings underscored the AI boom. Alphabet (Google) reported a 14% YoY jump in revenue to $96.4 billion (net income +19%) for Q2, driven by exceptional growth in its AI and cloud businesses swingtradebot.com. CEO Sundar Pichai noted AI is now integrated “across search, cloud, and YouTube” at massive scale swingtradebot.com. Even IBM, long a legacy name, has “quietly transformed” into an enterprise AI leader swingtradebot.com – both Alphabet and IBM are trading at valuation discounts despite their AI prowess swingtradebot.com, suggesting some AI plays may still be reasonably priced.

Major Deals and Partnerships in AI

Headlining the week’s deals, Tesla announced a blockbuster pact with Samsung Electronics to produce Tesla’s next-generation AI chips. Elon Musk’s EV company signed a $16.5 billion contract for Samsung to fabricate Tesla’s forthcoming “AI6” self-driving semiconductors at Samsung’s new plant in Taylor, Texas reuters.com. Musk confirmed on his X (Twitter) account that Samsung’s Texas foundry will make the AI6 chip, calling it a critical collaboration to accelerate Tesla’s Full Self-Driving and robotics roadmap reuters.com. “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house,” Musk quipped, underscoring his hands-on involvement reuters.com. The Tesla CEO also hinted the $16.5B figure is “just the bare minimum” and actual output could be several times higher over the deal’s duration reuters.com.

Investors cheered the tie-up: Samsung’s stock surged 6.8% in Seoul and Tesla jumped ~4.2% on Monday following the news reuters.com. Industry analysts noted the significance for Samsung’s foundry business, which until now had struggled to attract big clients for the new Texas fab. “So far [it] had virtually no customers, so this order is quite meaningful,” said Ryu Young-ho, a senior analyst at NH Investment & Securities, emphasizing the deal’s importance to Samsung reuters.com. For Tesla, the custom AI chips (used for in-vehicle FSD computers and the nascent Optimus robot project) are key to its autonomy ambitions. However, actual production is still years away – Musk has indicated current-generation AI5 chips won’t be made until late 2026, implying AI6 might only debut around 2027 or 2028 (and Tesla has a history of timeline delays) reuters.com. In the near term, the massive chip order won’t immediately boost Tesla’s EV sales or robotaxi rollout reuters.com reuters.com, but it cements a strategic partnership and provides a lifeline to Samsung’s contract chip division. Musk’s posts also revealed Tesla will continue a multi-vendor strategy: Samsung is building the present “AI4” chip and now AI6, while foundry leader TSMC is slated to manufacture the interim AI5 generation investopedia.com. This diversification may help Tesla secure capacity as global demand for AI semiconductors soars.

Another notable development came from Alibaba, which unveiled new AI-powered smart glasses in a bid to challenge Meta Platforms in the nascent AR/AI wearables space. The Chinese tech giant’s “Quark” AI glasses support features like hands-free calls, music streaming, real-time language translation and live meeting transcription, Alibaba announced investopedia.com. The product launch – coming ahead of Meta’s expected AI-integrated Ray-Ban glasses this summer – highlights how global tech firms are racing to blend AI assistants with consumer gadgets. Alibaba’s U.S.-listed shares climbed ~1.5% pre-market Monday on the news investopedia.com investopedia.com, as investors bet on new AI hardware opening growth avenues.

M&A Activity in the AI Sector

Merger and acquisition activity remains hot in the AI arena, as established tech companies snap up AI startups to bolster their capabilities. NICE Ltd., a publicly traded customer experience software company, announced a $955 million deal to acquire Cognigy GmbH, a German startup specializing in conversational AI for contact centers siliconangle.com. The cash-and-stock acquisition will fold Cognigy’s AI platform (Cognigy.AI) – which lets enterprises build custom virtual agents for customer service – into NICE’s own CXone suite. Investors applauded the move: NICE’s stock leapt about 7–8% in early trading on the announcement investing.com, reflecting optimism that Cognigy’s high-growth business will augment NICE’s revenue. (NICE’s organic sales were up 6% last quarter, while Cognigy expects 80%+ ARR growth next year, per the companies siliconangle.com.) “This is a landmark moment for NICE – a strategic move that fast-tracks our AI innovation agenda and sets a new standard for customer experience in the AI era,” said CEO Scott Russell of NICE, heralding the deal’s significance investing.com. Cognigy brings an impressive roster of enterprise clients (over 1,000 organizations including Mercedes-Benz, Nestlé and Lufthansa use its AI agents) and the ability to deliver human-like service in 100+ languages investing.com. The acquisition, unanimously approved by NICE’s board, is expected to close in Q4 2025 pending regulatory approvals investing.com. It underscores the “AI arms race” in the customer service sector, where incumbents are buying AI startups to embed generative AI and automation into their offerings.

Smaller-scale M&A and partnerships also dotted the landscape. For instance, NICE’s buyout of Cognigy follows a pattern of contact-center tech consolidation, and other incumbents may follow suit to keep pace. Separately, chipmaker Intel and Silicon Valley startup SiFive were rumored to be exploring a deal (though nothing materialized this week), and big defense firms continue shopping for AI/ML analytics specialists to enhance autonomous systems – highlighting how AI M&A spans industries from enterprise software to semiconductors and defense. (No other multi-billion-dollar AI acquisitions were formally announced on July 28–29 beyond the NICE-Cognigy deal, but the pipeline remains active.)

Venture Capital and Investments in AI

The frenzy of investment in AI startups shows no sign of cooling. In fact, data from PitchBook reveals that AI startup funding far outpaces exits – U.S. AI startups raised a staggering $104.3 billion in the first half of 2025, almost triple the $36 billion in AI-related exits over the same period pymnts.com. The trend is epitomized by OpenAI’s record-shattering fundraise. OpenAI (the firm behind ChatGPT) confirmed that it is raising up to $40 billion in a new round led by Japan’s SoftBank, valuing the company around $300 billion wired.com. This multi-tranche round – initially announced in March – reopened on Monday, July 28 for additional investors to participate wired.com. SoftBank has committed $10 billion now and $30 billion more by year-end (contingent on OpenAI reorganizing into a for-profit model) reuters.com reuters.com. The remaining funding is expected to come from Microsoft, Coatue, Altimeter, Thrive Capital and others as co-investors reuters.com. If completed, the raise will nearly double OpenAI’s valuation from its last round (a $6.6B fundraise in Oct 2024 at $157B) reuters.com, making OpenAI one of the world’s most valuable private companies alongside SpaceX and ByteDance reuters.com.

SoftBank’s founder Masayoshi Son cast the investment in almost historic terms. “AI is a defining force shaping humanity’s future. Our expanded partnership with OpenAI accelerates our shared vision to unlock its full potential,” Son said in a statement, underscoring the transformative promise he sees in artificial intelligence reuters.com. The capital will help OpenAI scale up computing infrastructure, research, and product development to meet surging demand – ChatGPT alone boasts 500 million weekly users – but it also comes with strings attached. OpenAI agreed to revamp its corporate structure to a “public benefit” model in order to accommodate the giant investment and still uphold its mission (a move that must be approved by regulators in Delaware and California) wired.com reuters.com. Some analysts have noted the irony that such enormous funding rounds are now required in the AI arms race. “OpenAI has very ambitious plans on many fronts and needs a lot of capital… The list of investors wanting to support that scope has shrunk and may be largely limited to SoftBank, which itself may not have the necessary capital,” observed Gil Luria, an analyst at D.A. Davidson reuters.com. In other words, only a handful of backers globally have pockets deep enough to fuel the next phase of AI development – reflecting both the opportunities and the concentration of capital in this sector.

Venture funding at more modest scales also continued. In the cybersecurity arena, Dropzone AI, a startup building autonomous AI agents for security operations centers (SOC), announced it raised $37 million in a Series B round led by Theory Ventures siliconangle.com siliconangle.com. Dropzone’s platform uses large language models to act as a “virtual Tier-1 analyst,” automatically triaging and investigating security alerts to dramatically cut down on manual workloads siliconangle.com. The technology is already deployed at over 100 organizations to handle routine threat alerts so human analysts can focus on complex incidents siliconangle.com. “We’re driving a generational shift in cybersecurity from manpower-bound, alert-chasing SOC teams to SOC teams backed by an army of autonomous AI agents… This change is not optional; it’s essential,” said Edward Wu, Dropzone’s founder and CEO siliconangle.com. The new funding brings the company’s total raised to about $57 million and will go toward expanding integrations and “agentic” AI capabilities in cyber defense siliconangle.com siliconangle.com.

Meanwhile, several other AI startups announced funding rounds in the past two days, ranging from seed-stage (e.g. Julius AI’s $10M seed for an “AI data analyst” tool) to growth-stage. Notably, the Scale AI deal closed earlier (a massive $14.3B investment led by Meta in a data labeling platform pymnts.com) and Anthropic’s $3.5B raise this year, show that capital is concentrating in a few large players. Investors argue that the biggest, boldest AI bets could “reasonably grow 10x” from here, justifying their valuations pymnts.com. Still, with venture money flowing freely into AI and few major exits so far, the pressure is on these startups to eventually deliver returns.

AI Chips, Geopolitics, and Market Impact

On the hardware side, Nvidia – whose stock has been emblematic of the 2025 AI rally – was at the center of a significant geopolitical development. Washington eased export restrictions on Nvidia’s AI chips to China this month, reversing a ban imposed in April, and Nvidia wasted no time capitalizing. According to Reuters, Nvidia placed orders for 300,000 of its H20 GPUs with manufacturer TSMC last week, after U.S. authorities quietly allowed it to resume sales of that advanced chip to Chinese customers reuters.com. Previously, Nvidia had been living off a large stockpile of H20s to fulfill Chinese demand (the H20 is a slightly scaled-down version of its flagship H100, tailored to comply with export rules). The new order – on top of an existing inventory of 600,000–700,000 H20 units – signals that Chinese AI demand is surging even higher than Nvidia anticipated reuters.com. Indeed, one source said Nvidia initially planned to rely on its stockpile but “strong Chinese demand” changed the equation reuters.com. For context, Nvidia sold about 1 million H20 chips in 2024 reuters.com; with this order it is effectively gearing up for a similar scale in the near future.

However, shipping those chips is not a simple matter of purchase orders. U.S. export licenses are still required for Nvidia to actually deliver H20s to China, and as of this week the Commerce Department had yet to approve the needed licenses for the new orders reuters.com. This policy shift has ignited political controversy in Washington. The decision to allow Nvidia’s sales drew bipartisan criticism from lawmakers worried that giving China access to advanced AI accelerators – even slightly neutered ones like the H20 – could undermine U.S. technological advantages in AI reuters.com. “The decision drew bipartisan condemnation from U.S. legislators who are worried that giving China access to the H20 will impede U.S. efforts to maintain its lead in AI technology,” reports Reuters reuters.com. The Biden (formerly Trump) administration argued the move was part of broader negotiations with China (involving rare earths and other trade-offs) reuters.com. Nvidia, for its part, has lobbied that continuing to supply China is crucial for business – and even strategically important. The company and its peers argue that retaining Chinese AI developers as customers for U.S. chips (which rely on Nvidia’s software ecosystem) is vital so they don’t switch entirely to domestic alternatives like Huawei’s new AI chips reuters.com. Indeed, Chinese tech giants from Tencent to Alibaba had bulked up H20 orders early this year to power their own AI models and startups’ systems reuters.com. Since the April ban, a grey market in smuggled high-end GPUs has boomed in China reuters.com, underlining how coveted Nvidia’s hardware is. Nvidia even warned that the spring export ban could force it to write off $5.5 billion in inventory and lose an estimated $15 billion in potential sales if it persisted reuters.com. Little wonder that CEO Jensen Huang flew to Beijing earlier in July to meet clients – he signaled that if orders were large enough, Nvidia would consider restarting full production of H20 chips, though any restart would take at least nine months lead time due to supply chain needs reuters.com.

In sum, the AI chip market is increasingly entwined with geopolitics. Nvidia’s share price has seesawed with each hint of export policy change. This week’s developments suggest a cautiously improving outlook for supply to China (hence the huge TSMC order), but also highlight the uncertainty – export approvals, political pushback, and the race by Chinese firms to develop indigenous AI silicon. For investors in AI hardware stocks like Nvidia, AMD, TSMC, and ASML, these policy moves are as consequential as product launches.

Analyst Commentary and Outlook

Taken together, the news of July 28–29 showcases an AI sector in full throttle – from blockbuster corporate deals and investment rounds to product innovation and global jockeying for AI supremacy. Industry experts are both enthusiastic and measured in their outlook. Executives like Elon Musk and Masayoshi Son are unabashed evangelists for AI’s transformative potential, with Son calling AI “a defining force shaping humanity’s future” reuters.com as he writes enormous checks to back that belief. At the same time, seasoned analysts urge some caution amid the exuberance. The sheer scale of capital being deployed raises the stakes: “OpenAI has very ambitious plans… and needs a lot of capital,” noted analyst Gil Luria, adding that only a few investors have the capacity (or will) to bankroll such moonshot ventures reuters.com. Others point out that many AI stocks have run up to rich valuations, though as Alphabet and IBM illustrate, not every company with AI credentials has been bid to extremes swingtradebot.com.

Wall Street’s view is that AI remains the key secular trend driving tech stocks in 2025, but success will require execution. The coming days will bring more big tech earnings (Microsoft, Apple, Amazon) where AI initiatives take center stage, and likely further M&A as companies race to acquire AI talent and IP. For now, the AI stock boom marches on, fueled by headlines like Tesla’s chip megadeal and OpenAI’s war chest. As long as companies keep demonstrating real progress – whether in robotaxis on the roads of Shanghai or AI agents in the contact center – investor enthusiasm for “all things AI” is set to continue, with analysts and executives alike framing this moment as the dawn of a new tech era. “AI is revolutionizing multiple industries… venture capital is flowing where the next big breakthrough is expected,” as one tech investor aptly put it pymnts.com. This week’s developments make clear that the AI revolution is not just theoretical – it’s happening in real-time across global markets and boardrooms.

Sources:

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Mateusz Brzeziński

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