The story around Nvidia (NASDAQ:NVDA) is becoming “messy” as the AI-focused chipmaker pours substantial capital into smaller firms that also happen to be its clients, according to analysts at Yardeni Research.
In a research note, Yardeni’s team highlighted that, while Nvidia has the financial resources to support these ventures, the company’s success is increasingly “closely tied to those” smaller players.
“As long as companies […] can continue to raise billions of dollars from Nvidia and others to build data centers, Nvidia’s chips should stay in demand,” the analysts wrote.
“But the day that stops, watch out.”
Earlier this week, Nvidia announced plans to invest up to $100 billion in OpenAI to help the ChatGPT creator expand its data centers, which are expected to rely heavily on Nvidia’s AI-optimized processors.
This move follows a string of high-profile investments by the California-based semiconductor giant. Last week, Nvidia revealed it would acquire a $5 billion stake in U.S. chipmaker Intel, with both companies planning to jointly develop processors for PCs and data centers. In addition, Nvidia has committed roughly $2.7 billion to U.K. AI start-ups and invested $500 million in British data center provider Nscale.
Previously, Nvidia invested $100 million in CoreWeave in 2023, and added another $250 million in stock when the AI-focused cloud company’s IPO outlook became uncertain last March. Media reports indicate that Nvidia has agreed to purchase any unsold server capacity at CoreWeave—equipped with Nvidia’s chips—through April 2032.
Analysts at Vital Knowledge pointed out the “circular nature” of these financing deals, essentially showing Nvidia backing its own clients. They noted that this arrangement has slightly dampened the exuberance around AI in recent days.
“[I]f AI is such an unstoppable phenomenon, why is Nvidia financially backstopping two of its biggest customers, OpenAI and CoreWeave?” they wrote.
Despite these concerns, Yardeni analysts argue that Nvidia’s stock does not reflect investor worry. The shares touched a 52-week high on Monday, and the AI leader has surged over 27% so far this year.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.