Nvidia is reportedly nearing the completion of a significant $30 billion investment into OpenAI, a move that marks a shift from a larger $100 billion commitment made last year. This adjustment comes as part of a substantial new funding round for the artificial intelligence start-up, which has seen its valuation soar to approximately $730 billion, not accounting for the fresh capital injection.
According to sources familiar with the negotiations, Nvidia’s equity investment could be finalized as soon as this weekend. This new deal is part of a broader funding initiative that aims to raise over $100 billion for OpenAI. The decision to scale back the initial $100 billion partnership, announced amid a wave of investor enthusiasm in September, reflects growing concerns about the stability of the AI sector, which has contributed to a 17% decline in U.S. tech stocks since the beginning of the year.
The initial agreement was presented as a “letter of intent,” solidifying the bond between Nvidia and OpenAI at a time when both companies were experiencing rapid growth in the AI market. Following the announcement, Nvidia’s market capitalization exceeded $5 trillion, an indication of investor excitement. Meanwhile, OpenAI engaged in various complex agreements with other tech firms, including major chip manufacturers AMD and Broadcom, as well as cloud service providers like Oracle. However, the intertwining nature of these agreements raised alarms among analysts about the creation of a potential bubble in the sector.
Under the original terms of the $100 billion investment, Nvidia was to contribute ten installments of $10 billion as OpenAI’s demand for computational capacity increased over several years, in exchange for a considerable stake in the AI company. OpenAI had plans to purchase millions of Nvidia’s AI processors to support its expansion, which included deploying up to 10 gigawatts of new computing capacity. Nevertheless, the agreement never advanced beyond a mere memorandum of understanding. Reports earlier this year indicated that the deal had been effectively paused.
The revised arrangement is considerably more straightforward, allowing Nvidia to invest $30 billion in return for OpenAI stock. This funding is expected to facilitate the establishment of additional gigawatts of computing capacity, with potential future deals likely to follow.
Both Nvidia and OpenAI have sought to reassure stakeholders that their relationship remains strong. Sam Altman, CEO of OpenAI, expressed his continued enthusiasm for collaborating with Nvidia, stating, “We love working with Nvidia and they make the best AI chips in the world. We hope to be a gigantic customer for a very long time.” Nvidia’s CEO, Jensen Huang, echoed this sentiment, dismissing any suggestions of discord between the two firms as “nonsense.”
In addition to Nvidia’s investment, OpenAI is also finalizing discussions with SoftBank for a similar $30 billion investment and Amazon, which may contribute up to $50 billion. Other potential investors include Abu Dhabi’s state-backed tech fund MGX and Microsoft, with expectations of significant financial contributions. OpenAI’s executive team has been actively meeting with venture capitalists to generate additional interest, indicating a robust strategy to secure funding.
OpenAI has outlined plans to expend about $600 billion on computing resources, leveraging not only investments from Nvidia, Amazon, and Microsoft but also ensuring access to a steady supply of electrical power. The company views this as essential for maintaining a competitive edge against potential rivals in the ever-expanding AI landscape. OpenAI’s revenue reached an impressive $20 billion on an annualized basis earlier this year, reflecting a strong correlation between its financial growth and its access to computational power, both of which have seen significant increases year on year.
