The Trillion-Dollar Question: Can AI Startups Justify Their Astronomical Valuations?

Source: Blockworks Original Title: The incredible, incomprehensible, possibly impossible world of trillion-dollar tech valuations Original Link: https://blockworks.co/news/trillion-dollar-tech-valuations

The Trillion-Dollar Boom

“There’s a belief that the world’s GDP is somehow limited at $100 trillion. AI is going to cause that $100 trillion to become $500 trillion.”

— Jensen Huang

In 1901, US Steel became the first $1 billion company—“an almost unthinkable sum.” Today, there are now 11 publicly traded companies worth more than $1 trillion.

For perspective: if you earned $1 every second of the day, you wouldn’t become a trillionaire until the year 33,168.

The Valuation Question

Aswath Damodaran performs reverse DCF analysis to determine what revenue these companies need to justify current valuations:

• Tesla: Must earn $2.2 trillion annually by 2030—“pushing the limits of possibility”
• Nvidia: Needs ~$590 billion annually by 2030—“possible and plausible” but still gargantuan

For context, US Steel’s entire 1901 value was only ~$46 billion in inflation-adjusted terms.

The New Unicorn Era

The term “unicorn” (startups valued at $1 billion) was coined just 12 years ago. Now we have:

• Centicorns: Privately held startups worth 100x more than unicorns
• OpenAI: Raising $100 billion in a single funding round
• SpaceX: Raising at $800 billion valuation with plans to IPO at $1.5 trillion
• Anthropic: Could IPO at $300 billion
• Thinking Machines: Raised $2 billion in a seed round

Market Landscape

US Dominance: The US has 712 unicorns worth $2.9 trillion collectively, vs. 157 for second-place China. 80 new unicorns were created in 2025 alone.

European Gap: In 2024, the EU collected more in tech company fines than from all public European internet companies. Over the past 50 years, Europe produced just 14 companies with >$10 billion market cap vs. 241 in the US.

Economic Headwinds

Credit Concerns: Oracle debt now trades at junk-bond levels.

Labor Market Shift: With US unemployment rising and wage growth declining, jobs are replacing prices as the focus of economic anxiety. Small businesses have been hit hardest by tariffs.

Tariff Reality: While effective tariff rates are about half the headline numbers due to delays and exceptions, nearly 100% are being passed to consumers via higher prices.

Wage-Productivity Gap: The gap between US productivity and hourly wages for non-supervisory employees continues to widen, accelerating as the economy transforms through global supply chains and technology.

Cultural Shifts

• Reading for personal interest among Americans is down 10 percentage points since 2005
• Nearly 50% of US teens “hardly ever” read in their spare time, up from 20% in 1990
• The percentage of US families with children continues to fall

Global Capital Flows

10-year Japanese government bond yields hit 2% for the first time since 1999. Surprisingly, Japanese investors are buying US investments rather than repatriating capital—likely due to the appeal of US AI stocks.

The Bottom Line

As one observer notes: “We pull sand, oil, and ore from the earth and transmute them into machines cheaper than aged milk” (a Tesla Model 3 costs less per pound than Camembert cheese).

The real question remains: Will these companies collectively earn the trillions required to justify current valuations? As the head of ChatGPT recently noted, “There is near-infinite demand for intelligence.” If true, perhaps there should be near-infinite demand for these stocks as well.