Nvidia’s AI Growth Story Turns “Messy” Amid Investment Spree
The narrative around Nvidia is becoming “messy” as the AI leader pours billions into smaller companies that are also its customers, according to Yardeni Research analysts.
Nvidia’s Investments Tied to Customer Growth
Analysts noted that while Nvidia has the financial strength to fund these deals, its future performance is now “closely tied” to the success of these smaller firms.
“As long as companies can keep raising billions of dollars from Nvidia and others to build data centers, demand for Nvidia’s chips will remain strong,” Yardeni wrote. “But the day that stops, watch out.”
Billions Committed Across AI Ecosystem
Earlier this week, Nvidia announced plans to invest up to $100 billion in OpenAI to support new data centers built around its AI-optimized chips.
This follows a string of commitments:
- A $5 billion stake in Intel, alongside joint plans for PC and data center processors.
- $2.7 billion in the U.K.’s AI startup ecosystem.
- $500 million in British data center operator Nscale.
In 2023, Nvidia invested $100 million in CoreWeave, later adding another $250 million when the company’s IPO prospects weakened. Reports suggest Nvidia has also agreed to buy any unsold server capacity from CoreWeave, filled with its own chips, through April 2032.
Analysts Warn of “Circular Financing”
Vital Knowledge analysts called these arrangements “circular,” as Nvidia is effectively financing its customers while ensuring demand for its products. They questioned whether true market demand justifies the financial backstops.
“If AI is such an unstoppable phenomenon, why is Nvidia financially supporting two of its biggest clients, OpenAI and CoreWeave?” they wrote.
Market Reaction Remains Positive
Despite the concerns, Nvidia shares continue to rally. The stock hit a 52-week high on Monday and is up more than 27% year-to-date, showing that investors remain confident in the company’s AI dominance.
