US tech giant Nvidia, the chipmaking company, plans to invest up to $100 billion in OpenAI and supply it with data centre chips. This marks a major partnership between two of the top players in the global AI race. The deal comes at a time when China is emerging as a key competitor in artificial intelligence.
A strategic partnership
The latest move by two high profile tech firms in the global AI race is described by Nvidia as a “strategic partnership”. The announcement follows a series of high-profile investments by Nvidia, including $5 billion in Intel and £2 billion in the UK’s AI sector.
There will be two separate but connected transactions in the deal. Nvidia will invest in OpenAI by purchasing non-controlling shares, and OpenAI will pay Nvidia in cash for chips. Deliveries of the chips are expected to start as early as late 2026.
The first $10 billion of Nvidia’s investment in OpenAI, recently valued at $500 billion, will begin once the two companies reach a definitive agreement for OpenAI to purchase Nvidia chips. Nvidia had previously invested $6.6 billion in OpenAI.
OpenAI, the company behind ChatGPT, has also committed 49% of its profits to Microsoft following a $13 billion investment in 2023. The company is amid a lengthy, heavily-litigated process to become a for-profit entity.
Advancing AI infrastructure & government pressure
Both firms said they were already working with a broad network of collaborators focused on making the “world’s most advanced AI infrastructure”, including Microsoft, Oracle, SoftBank, and Stargate.
However, the dominance of US AI firms has come under pressure from China, especially with the rise of DeepSeek-R1.
China said last week that Nvidia had violated its anti-monopoly laws, but provided no details on how Nvidia had breached the rules.
China also reportedly ordered its top tech firms to halt purchases of Nvidia’s AI chips. CEO Jensen Huang told the BBC he was “disappointed” by the news. This comes after Nvidia and rival AMD agreed to pay the US government 15% of their Chinese revenues to secure export licences to China, lifting a US government ban on AI chip sales to China.
Despite the tensions, Nvidia’s share price closed up 4% at the end of Monday’s US trading.
Stock market implications
OpenAI has over 700 million weekly active users, and its new partnership with Nvidia would “advance its mission to build artificial general intelligence that benefits all of humanity.”
OpenAI cofounder and CEO Sam Altman said the partnership will allow both firms to “create new AI breakthroughs and empower people and businesses with them at scale”.
Greg Brockman, cofounder and president of OpenAI, said the company had been working closely with Nvidia since “the early days” of the business.
Nvidia’s $100bn OpenAI deal raises more questions
One thing is clear from the announcement on September 22: the Nvidia-OpenAI deal highlights how closely major Silicon Valley tech firms are working together, concentrating influence among a few major players.
The deal makes today’s AI-driven stockmarket rally increasingly dependent on the fortunes of the world’s most valuable company and America’s biggest private tech firm.
CEO Jensen Huang described the deal as a boost to GPU sales, which probably supported the stock. He also said selling up to 5 million extra GPUs would be roughly the same as Nvidia’s total GPU shipments for the year. There was another unspoken benefit. The partnership would make OpenAI more reliant on Nvidia’s chips, reducing the incentive for it to develop its own.
It was also clear that Nvidia plans to fund the GPU sales through the $100 billion it is proposing to invest in OpenAI. The investment will increase in $10 billion increments for each gigawatt (GW) of Nvidia-supported data-centre capacity that OpenAI builds—up to 10GW.
Some Nvidia investors and analysts welcomed the proposed investment as a quick way for the chipmaker to fund sales. According to Pierre Ferragu of New Street Research, a firm of IT analysts, Nvidia would invest $10 billion for every $35 billion of GPUs OpenAI buys – leaving OpenAI to pay 71% in cash and 29% in shares.
Concerns about the deal
However, some voiced concerns. Stacy Rasgon of Bernstein (an investment firm) told CNBC that the deal could worsen fears over the “circular dynamics” of Nvidia investing in companies that also buys its GPUs. The size of the deal will “clearly start to raise some questions”, he said.
OpenAI’s use of privately held shares as currency may also deepen concerns about its limited cash reserves as it takes on ever-bigger spending commitments. The company has reportedly agreed to a $300 billion deal with Oracle (a data firm) to build 4.5GW of data-centre capacity over five years starting in 2027 – this was the main contributor to Oracle’s strong earnings forecast earlier this month. The project is tied to the “Stargate” project announced by President Donald Trump at the White House in January.
Financing and infrastructure challenges
How OpenAI will finance such massive spending remains unclear. ChatGPT is the most popular AI app, but the response to its GPT-5 models has been underwhelming. For now, the sums OpenAI is promising to spend exceed its annual revenues of about $13 billion a year.
Cash is not its only hurdle. Additional power capacity of 10GW is almost half of the 22GW of utility-scale electricity generation added in the U.S. in the first half of this year, or the equivalent of ten nuclear power plants. Even with a looser infrastructure-permitting regime, building that much capacity could take years.
Altman’s three big challenges
Announcing the Nvidia partnership, OpenAI boss Sam Altman highlighted three big challenges. One was advancing AI research. The second was creating products that entice users. The third was the “unprecedented infrastructure challenge”, such as securing chips and power supply. A lot of interconnected wealth depends on him solving all three challenges at once. Convincing his wealthy friends in Silicon Valley, however, remains the easiest task.
Disklaimer: This material is for general informational and educational purposes only and should not be considered investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked in this communication.
