AI Titans Nvidia and OpenAI Announce Landmark Investment Partnership

Nvidia will invest up to USD 100 billion in OpenAI and supply the organisation with data centre chips, marking a significant tie-up between two leading players in the global artificial intelligence race. This move, announced Monday, highlights the increasingly overlapping interests of tech giants developing advanced AI systems.

Credit: NVIDIA

The deal gives chipmaker Nvidia a financial stake in OpenAI, which is already an important customer. Simultaneously, the investment provides OpenAI with essential cash and access to advanced chips, crucial for maintaining its dominance in a competitive landscape.

The agreement involves two separate but intertwined transactions, according to a person close to OpenAI. Nvidia will begin investing in OpenAI for non-voting shares once the deal is finalised, allowing OpenAI to then use the cash for Nvidia’s chip purchases.

OpenAI CEO Sam Altman stated, “Everything starts with compute.” He added that compute infrastructure will form the basis for the future economy, and the collaboration with Nvidia will facilitate new AI breakthroughs and empower people and businesses at scale.

The two companies signed a letter of intent to deploy at least 10 gigawatts of Nvidia systems for OpenAI, aiming to finalise partnership details in the coming weeks. The power required for these chips is equivalent to the needs of more than 8 million U.S. households.

Nvidia shares rose as much as 4.4% to a record intraday high after the announcement, while data centre builder Oracle gained approximately 6%. Oracle is collaborating with OpenAI, SoftBank, and Microsoft on Project Stargate, a USD 500 billion plan to construct massive AI data centres globally.

Under the new deal, Nvidia will invest an initial USD 10 billion once a definitive agreement for OpenAI to purchase Nvidia systems is reached, the person familiar with the matter said. OpenAI was most recently valued at USD 500 billion.

Nvidia is expected to start delivering hardware as early as late 2026, with the first gigawatt of computing power deployed in the second half of that year on its upcoming Vera Rubin platform. Analysts largely viewed the deal positively for Nvidia, though some voiced concerns about investment dollars returning as chip purchases.

Bernstein analyst Stacy Rasgon commented that while the deal helps OpenAI achieve its aspirational compute infrastructure goals and ensures Nvidia’s products are utilised, "circular" investment concerns raised previously will likely intensify. OpenAI, like Google and Amazon, has been developing its own AI chips as a potentially cheaper alternative to Nvidia.

A person familiar with the matter stated the deal does not alter OpenAI’s ongoing compute plans, including its internal chip development efforts or its partnership with Microsoft. Reuters reported earlier this year that OpenAI was working on a custom chip with designer Broadcom and Taiwan Semiconductor Manufacturing Co., leading to Broadcom shares falling 0.8% after the news.

This pact represents the latest in a series of agreements among major technology players. Microsoft has invested billions in OpenAI since 2019, and Nvidia last week unveiled a collaboration with Intel on AI chips, also committing USD 5 billion to Intel earlier this month and backing OpenAI in an October 2024 funding round of USD 6.6 billion.

The substantial nature of Nvidia’s latest commitment could attract antitrust scrutiny. The Justice Department and Federal Trade Commission reached a deal in mid-2024, clearing the way for potential probes into the roles of Microsoft, OpenAI, and Nvidia within the AI industry.

Credit: THE WHITE HOUSE

However, the administration of U.S. President Donald Trump has adopted a lighter approach to competition issues compared with the previous Biden administration. OpenAI and its main backer, Microsoft, also announced earlier this month a non-binding agreement to restructure OpenAI into a for-profit entity, signalling further governance changes.

Andre Barlow, an antitrust lawyer with Doyle, Barlow & Mazard, suggested the deal could alter the economic incentives of Nvidia and OpenAI. He added it could potentially solidify Nvidia’s chip monopoly with OpenAI’s software lead, making it more difficult for competitors like AMD in chips or OpenAI’s rivals in models to scale. Barlow further noted that the Trump administration’s pro-business approach to regulations removes hurdles that might slow AI growth.

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• Nvidia will invest up to USD 100 billion in OpenAI and supply data centre chips.

• The deal involves non-voting shares for Nvidia and chip purchases by OpenAI.

• OpenAI aims to deploy at least 10 gigawatts of Nvidia systems starting late 2026.

Source: REUTERS