Nvidia’s $100 Billion OpenAI Deal Disappears Mysteriously

The recent developments regarding Nvidia’s $100 billion deal with OpenAI have raised eyebrows within the tech community. Insiders at Nvidia are reportedly skeptical about the transaction, with company CEO Jensen Huang expressing concerns over OpenAI’s business approach.

Nvidia’s Concerns About OpenAI

A Wall Street Journal report indicates that Huang privately criticized OpenAI for its perceived lack of discipline. This concern comes in light of growing competition for OpenAI from tech giants like Google and Anthropic. Huang dismissed these claims as “nonsense.”

Stock Market Reactions

The aftermath of these revelations saw Nvidia’s stock dip approximately 1.1 percent on a recent Monday. Sarah Kunst, managing director at Cleo Capital, pointed out the unusual nature of the discussions surrounding the deal. She noted that Huang’s statements lacked a firm commitment to the projected $100 billion valuation.

Investment Dynamics

Market analysts have voiced questions about the structure of Nvidia’s investments. Bryn Talkington of Requisite Capital Management highlighted the cyclical nature of financial flows between Nvidia and OpenAI. “Nvidia invests $100 billion in OpenAI, which then OpenAI turns back and gives it back to Nvidia,” Talkington remarked.

• This investment framework raises questions about the sustainability of such transactions.
• Critics like Ed Zitron have called attention to Nvidia’s favored position in the tech landscape.

Partnerships with Other Companies

OpenAI appears to be diversifying its sources for computing power beyond Nvidia. The company has engaged in discussions with startups like Cerebras and Groq. However, reports indicate that a $20 billion licensing agreement between Nvidia and Groq may have stalled OpenAI’s talks with the latter.

In a strategic move, Nvidia hired Groq’s founder, Jonathan Ross, along with other top executives. Subsequently, OpenAI secured a $10 billion contract with Cerebras, enhancing its computing capacity through 2028.

Diversifying AI Chip Sources

OpenAI continues to hedge its bets by seeking alternatives to Nvidia. In October, the company formed a partnership with AMD for six gigawatts of GPUs. Additionally, OpenAI announced intentions to collaborate with Broadcom on a custom AI chip, aiming to reduce dependency on Nvidia.

While OpenAI’s future strategies are taking shape, the timeline for these custom chips remains uncertain. The evolving dynamics between Nvidia and OpenAI will be crucial in understanding the future of AI investments.