The financialization of the economy in the age of AI
Here’s a staggering piece of news that appeared yesterday on the website of Kotaku, a news/com company specialising in the games sector: ” Nvidia has just grown by $329 billion in a single day “. https://fr.kotaku.com/carte-graphique-nvidia-nvda-ai-record-boursier-microsoft-1851610338, by Ethan Gach. This is the largest market capitalisation growth ever achieved (i.e. the value of a company’s shares multiplied by the number of shares put on the market).
Nvidia is an American multinational founded in 1993 as a manufacturer of chips for graphics cards. Today it is one of the leading companies in the global AI universe. It is considered to be at the heart of the development of humanoid robotics and the content development sector.
Before this extraordinary increase in its value (” 329 billion is more than Netflix, Coca-Cola and Bank of America combined”, see Gach’s article), Nvidia ranked 3rd among the world’s leading companies by market capitalisation. 329 billion dollars is a lot – a lot – when you consider that more than 130 countries in the world recorded a GDP of less than 330 billion dollars in 2023! Just for comparison: the GDP of the Czech Republic was 335 billion, that of Finland 305, that of Pakistan ( 241 million people) 310, that of South Africa 380 billion!
Why such a rich and unexpected gift? What has Nvidia done to deserve it? Has it invented ultra-powerful chips capable of developing products and tools to rapidly cleanse agriculture of all the chemical poisons (pesticides, in particular) that have devastated it? Or has it developed programmes, under the aegis of the UN and with money from the World Bank (direct investments, not loans!), to help the world’s poor countries repair the destruction of their ecosystems by the predations inflicted by the powerful economic and financial groups of the North? Not one bit. Not a crumb of it. The stock markets’ response? “That’s how the stock markets work! This is not…. a sensible response, nor is it encouraging.
The market value of the world’s top 50 companies by market capitalisation now exceeds 40 trillion dollars! The three main equity investment funds – BlackRock, Vanguard and State Street – alone manage more than 26 trillion dollars of capital. Their sole aim is to increase the market value of their capital by investing in the most profitable companies. At COP21 in Paris in 2015, the world’s rich countries made a solemn commitment to allocate, from 2020 onwards, the “miserable” sum of 100 billion dollars a year (public and private capital) to help poor countries combat climate change, for which, as we know, the rich countries are the main culprits and the poor countries the main victims. The rich countries have not been able to collect the 100 billion. It seems that the first transfers could begin by the end of 2024.
In this context, what is the point of the huge amounts of stock market money mentioned above? What is their purpose? I can hear cries from far and wide within the US government and the EU Commission: “to continue the war in Ukraine until victory is achieved”, “to fund the State of Israel with arms and money to carry out the genocide of the Palestinians to the last man”, “to support the chip industry in Western countries to win the technological war against China” ….
The table I have just drawn up highlights three aspects, the last two of which throw a glaring light on the nonsense of Nvidia’s meteoric rise in financial value.
First aspect. Of the top 10 companies by market capitalisation seven are American, and the 10th – a Chinese company from the island
Table. The world’s top 10 companies by market capitalisation, workforce and sales (years 2022-2023)
Capitalisation
Employement
Net sales in
2023
2023
mld $ (2023)
1. Apple
3.340 miliardi
162
405 (2022)
2. Microsoft
3.083
21O.000
212
3. Nvidia
2.664
23
28
4. Alphabet (G)
2.097
153
n.d.
5. Amazon
1.911
1.600.000
574
6. Aramco
1.777
105
560
7 Meta (Facebook)
1.255
70
134
8. Berkshire H.
929
400
245
9 Lilly
807
35
30
10 tsmc
740
52
61
Sources. Capitalisation https://fr.tradingview.com/markets/world-stocks/worlds-largest-companies. Employees and sales: various, Petrella
2024 . The data on capitalisation in 2023 varies slightly according to the depending on the source.
of Taiwan – certainly owes its financial power to its position as a strategic ally of the US technological war against mainland China. The priority given to importance of financial stocks in world company rankings, relegating the value represented by the number of jobs and sales, reflects a system of values specific to the United States, dominated by the imperatives of money and enrichment.
Second aspect. With sales of 28 billion euros, Nvidia does not even feature in the ranking of the world’s top 50 companies by turnover. This distance from the figures for the five companies at the top of the ranking is enormous : turnover of Walmart 501.0 billion, State
Grid 349.0, Sinoper 327.0, China National Petroleum 326.0, Royal
Dutch Shell 311.9. This shows the extent of the dissociation between Nvidia’s financial value and its value in the real economy. What, then, is the meaning of economic value (eco-nomy means “house rules”)? It is certainly not to be found in the volatility of stock market value, which is extremely high.
The absence of meaning, the absurdity, is confirmed by the third aspect. While the number of employees at Microsoft, Apple, Alphabet, Amazon… varies between 153,000 (Google Alphabet) and 1,000,000 (Amazon), Nvidia’s workforce is the lowest of the 10 companies in question, stopping at 23,000. Even TSMC has 50,000 employees (twice as many as Nvidia) and Meta (Facebook) has 70,000 (three times as many). Nvidia is the company with by far the lowest number of employees that is receiving the most enthusiastic support from the world of finance by being awarded the highest stock market value in the world.
In today most “developed” countries of the world neither dignified human work and the right to employment, on the one hand, nor the promotion and safeguarding of the global commons essential to life, on the other, are considered, respectively, the key economic and social value and the major objectives of the global agenda : In both cases, supreme importance is given to stock market values divorced from the real economy and to growth in the monetary value of financial assets (especially private capital).
You don’t have to look far or anywhere else for the absurdity. Taking into account the fact the major popular mobilisations (marches, petitions, referendums, calls for strikes, etc.) have had no immediate positive effect to date it seems to me that an important immediate solution is to act on the citizens of Western countries (USA, European Union, etc.) at the level of awareness and responsibility. The aim will be, through messages, appeals and joint mobilisations, to make them aware of the fact that the adherence of the majority of them to the dominant financial system, particularly the stock market, makes them allies and accomplices of the absurd. The decisive role played by the blindness, cynicism and hypocrisy of those in power is unquestioned However, we and our peoples are also co-responsible for the absurdity in which the world’s economy and politics are swimming, and in which hundreds of millions of human beings are drowning because of leaders whom we have elected and who have abdicated their duty to defend, guarantee and promote the universal rights to life and life itself.
Coxyde (B) , 3 August 2024