Doubts Swirl Around Nvidia’s $100 Billion OpenAI Deal
Nvidia’s decision to invest up to $100 billion in OpenAI while simultaneously planning to provide millions of its leading artificial intelligence chips to the creator of ChatGPT is unprecedented in the tech industry. According to a source, Nvidia will be acquiring a financial interest in one of its biggest clients, although it will not gain any voting rights in exchange. The creator of ChatGPT will obtain a portion of the funding necessary for its ambitious plans to construct the extensive supercomputers essential for advancing new generations of AI.
Nvidia’s initial $10 billion investment is set to fund a gigawatt of capacity utilizing its next-generation Vera Rubin chips, with construction anticipated to commence in the latter half of 2026. During an earnings call in August, Nvidia CEO Jensen Huang stated that constructing AI data centers requires approximately $50 billion per gigawatt of capacity, with around $35 billion of that investment allocated to Nvidia’s chips and equipment. Nvidia has pledged to invest in OpenAI to assist in developing 10 gigawatts of data center capacity, equating to approximately $10 billion per gigawatt. Approximately $40 billion in additional capital is necessary for each gigawatt of capacity that OpenAI intends to construct. OpenAI has not indicated whether it concurs with Huang’s cost estimates or, if it does, where it would source the additional funds. OpenAI did not respond to a request for comment regarding its funding plans.
OpenAI is a non-profit corporation, a structure that has its origins in its early days as an AI research group. The organization has been seeking to transition to a more conventional structure that would facilitate easier fundraising and enable a public offering. OpenAI has engaged in thorough discussions with Microsoft, a significant shareholder that supported OpenAI’s initial computing requirements, to modify its structure. Earlier this month, the two firms announced that they had reached a tentative agreement regarding OpenAI’s transition to a for-profit public benefit corporation, which would be supervised by OpenAI’s current non-profit. However, this move still requires approval from state officials in Delaware and California. Nvidia is set to make a cash investment in OpenAI, akin to the investments made by other stakeholders in the organization. Furthermore, Nvidia’s initial $10 billion investment will commence only after OpenAI and Nvidia finalize a definitive agreement in the upcoming months. It remains uncertain if Nvidia intends to invest in OpenAI’s non-profit organization or if its plans are contingent upon OpenAI’s transition to a public benefit corporation managed by a non-profit.
OpenAI is currently valued at $500 billion, Nvidia’s initial $10 billion investment for one gigawatt of capacity would be at that valuation. However, neither Nvidia nor OpenAI provided a timeline for when the full 10 gigawatts of capacity will become operational, nor for the $100 billion investment to occur. It remains unclear whether future Nvidia investments in OpenAI will occur at OpenAI’s current valuation or at the valuation of the company at the time of each Nvidia investment. The agreement between Nvidia and OpenAI may result in Nvidia allocating a substantial quantity of its chips, which continue to be in high demand years into the AI boom, to a single customer in which it also holds a stake. Access to these chips can significantly influence success or failure in the industry. An important question is whether OpenAI’s rivals, such as Anthropic or even Microsoft, which competes with OpenAI to sell AI technology to businesses, will retain access to Nvidia’s chips. The deal prompts inquiries regarding AMD’s aspirations to rival Nvidia in the market for chips aimed at OpenAI and similar entities, and whether it stands a realistic opportunity to supply chips to AI firms.
“Our investments will not change our focus or impact supply to our other customers – we will continue to make every customer a top priority, with or without any equity stake,” an Nvidia spokesman told in a statement on Tuesday. Oracle announced earlier this month that it has secured contracts worth hundreds of billions of dollars to deliver cloud computing services to OpenAI and several other major clients, resulting in a significant increase in its stock price and elevating co-founder Larry Ellison to one of the wealthiest individuals globally. However, a crucial question remains following that forecast – a question highlighted by the debt-rating firm Moody’s – regarding whether OpenAI possesses the necessary funds to fulfill the contracts. On Monday, just prior to Nvidia’s announcement, Oracle reaffirmed its forecast while appointing two new CEOs. Nvidia’s investment plans may strengthen Oracle’s revenue forecast, as a key customer, OpenAI, has secured new capital commitments.
