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Nvidia Expands Playbook With $100 Billion OpenAI Deal

Sep 24, 2025 07:55:00 -0400 by Martin Baccardax | #AI

Nvidia is powering the AI investment boom. (PATRICK T. FALLON/AFP via Getty Images)

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Nvidia has the hottest product in the world’s biggest investment boom. Its chips sit within the heart of data centers that power artificial-intelligence technologies around the globe.

It’s a $4 trillion behemoth at the center of both U.S. and China’s tech policy. CEO Jensen Huang, meanwhile, has spoken about “insane” AI demand dynamics, a “new industrial revolution,” and the potential of an “infinite” need for computing power.

So why is it paying for someone to buy its newest chips?

It’s all about growing the AI ecosystem. But it also raises questions about how that system seems to increasingly moves money within itself.

Nvidia entered a $100 billion financing arrangement with OpenAI on Monday that reportedly will see the ChatGPT creator, which has yet to turn a profit, cede an equity stake to Nvidia as it builds out its data center capacity. The tech giant also will supply 10 gigawatts of AI infrastructure to OpenAI, with the first batch built on its next generation Vera Rubin platform.

Bank of America analyst Vivek Arya was bullish on the agreement, estimating it could generate as much as $500 billion in overall revenue for Nvidia.

“Perhaps more importantly, OpenAI will work with Nvidia as a preferred strategic compute and networking partner,” he added.

But setting aside the need to offer vendor financing to OpenAI, a company worth an estimated $500 billion—with the backing of Microsoft and the stamp of approval from the White House —the deal also highlights the increasing “closed loop” aspect of AI investments.

BofA’s Arya sees the OpenAI deal as a way for Nvidia to leverage its impressive profit and free cash flow margins into a flywheel of future growth.

Regulations have made direct stakes in other companies more cumbersome, he said. That means the alternative is to invest in the ecosystem itself in order to “expand the size of the addressable opportunity that could multiply future benefits, or accelerate time to market for new products.”

That certainly seems to be the playbook.

Earlier this month it was reported by The Wall Street Journal that Oracle —one of Nvidia’s biggest customers— booked a $300 billion contract to provide computing power to OpenAI, which now, according to reports, has committed to buying Nvidia chips.

That leaves billions of dollars flowing from OpenAI into Oracle, then back into Nvidia, then back into OpenAI, and then back into Nvidia once again.

But it doesn’t echo the bullish AI theme of insatiable demand. Nor does it speak well of Nvidia’s sales concentration, which was exposed in a Securities and Exchange Commission filing last month.

Two customers, dubbed “A” and “B” accounted for nearly 40% of Nvidia’s July quarter revenue, up from around 25% over the same period in 2024.

Adding OpenAI to the mix alleviates a portion of that concern but seemingly at an upfront cost. The first $10 billion of the deal will be paid in cash, in return for a reported equity stake.

The rest of the deal feels a little too dramatic to be true.

OpenAI would need to deploy 10 gigawatts of computing power to reach the maximum investment of $100 billion. That’s enough to light every home in New York state, would equal the maximum capacity of five Hoover Dams, or allow eight Deloreans to travel through time in Back to the Future.

Current power capacity couldn’t possibly meet that demand, and building out the required infrastructure for electrical grids, stations, and beyond would take several years and multiple more billions of dollars.

That likely won’t matter much for Nvidia stock. Analysts see it generating $207 billion in revenue this fiscal year and another $270 billion in 2027, with a gross profit margin in the low-70% range. Sales could top $1 trillion within five years. And AI capital expenditure isn’t slowing down.

But when the world’s hottest trade starts to lean on hype over substance, it might be time to start asking whether anyone beyond the chip makers are close to making some money from it.

Write to Martin Baccardax at martin.baccardax@barrons.com