Why Nvidia bankrolls its rivals
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Nvidia is weighing more than $750 billion in AI investments, financing deals and partnerships — betting that any growth in the compute market will ultimately benefit its chip business.
Why it matters: The world's most valuable chip company is bankrolling the same customers racing to build alternatives to its chips.
State of play: Nvidia is the largest corporate venture investor in AI by deal value, according to PitchBook research viewed by Axios.
- Nvidia invests across several AI labs because they don't care which model company wins as long as they buy Nvidia's GPUs, per PitchBook.
- Bloomberg reports that Nvidia is involved in proposed AI partnerships and financing arrangements valued at more than $750 billion, although only a portion would represent capital directly at risk for Nvidia.
- Nvidia is also discussing a guarantee of as much as $250 billion for an OpenAI data center project, reported by the Wall Street Journal, which helps lower OpenAI's borrowing costs, but exposes Nvidia if that debt isn't repaid.
Between the lines: Nvidia is throwing money at companies that could end up being competitors.
- "Somebody's going to start competing with them," Jay Hatfield, chief investment officer of QVOL, told Axios.
Follow the money: If AI demand continues to outstrip available compute, alternative chips could expand the overall market without damaging Nvidia.
- More capacity could lower AI costs, increase usage and create additional demand for Nvidia's systems.
- But if Nvidia helps finance more capacity than the market can absorb, it could face weaker chip pricing, slower orders and losses on guarantees or investments.
Friction point: Many of Nvidia's biggest customers are building chips designed to peel away parts of Nvidia's business.
- "One of the things that we work very hard towards is trying to figure out how can we help there just be more compute in the world," OpenAI co-founder Greg Brockman told reporters at a briefing in July.
- OpenAI still relies on Nvidia chips for training, but has released its own chip for servicing AI queries and recently hired a compute executive, potentially indicating bigger ambitions.
- Patrick Moorhead, CEO of Moor Insights told Axios it would be a challenge but "it's possible" for OpenAI to compete with Nvidia, adding it took Google a decade to compete with Nvidia's chips strategy.
Zoom out: Nvidia currently owns the market for training AI models, according to Jay Goldberg, the lone Wall Street analyst with a sell rating on Nvidia.
- There's a lot of training going on right now, but that could diminish over time if AI becomes commoditized and the performance gap between top-tier models shrinks.
- In that world, demand for inference chips that are used to run AI models could outpace demand for training chips that Nvidia specializes in.
- Nvidia "does not have a lock" on the inference market, and there are now dozens of competing chip offerings, Goldberg told Axios via email.
Zoom out: Meta, Microsoft, Google and Amazon are all developing their own AI chips, though only Google and Amazon currently make them broadly available to customers through their cloud platforms.
- "These companies believe that they can improve the total cost of ownership to run inference and in some cases training of the models," Moorhead said.
Reality check: Nvidia's customers repeatedly say they're not trying to compete with the chip giant.
- Brockman believes "we will remain in this compute shortage no matter what," meaning there's room for more players to enter the space.
- Nvidia also has Jensen Huang's track record working for it.
The bottom line: Nvidia is financing customers that still need its most advanced chips today, while helping them reach the scale required to replace Nvidia in more of their workloads tomorrow.
