Nvidia Stock Rises. Watch OpenAI to See Where It Goes Next.

Nvidia chips are the favored choice for training artificial-intelligence models. (David Paul Morris/Bloomberg)

Key Points

• Nvidia’s stock increased by 0.7% to $179.50 in premarket trading, aligning with gains in other AI-related stocks.
• Nvidia’s future growth is linked to OpenAI’s success, particularly its Stargate AI infrastructure project, a key industry investment.
• OpenAI’s new Pulse product, offering personalized updates, could help it generate over $40 billion in annual advertising revenue.

Nvidia was gaining early on Monday. The chip maker’s future gains are likely to depend on the progress of ChatGPT-developer OpenAI.

Nvidia shares were up 2.8% at $183.24 in early trading after rising 0.3% on Friday.

The move looked to be largely in line with other AI-exposed stocks. Among other chip makers, Advanced Micro Devices was rising 2.1% and Broadcom was gaining 0.8%.

The debate around Nvidia and the AI sector as a whole continues to revolve around whether seemingly circular deals, such as its up-to $100 billion investment in OpenAI, can sustain the spending boom. Nvidia CEO Jensen Huang said last week on a podcast that he expects ChatGPT-developer OpenAI to be “the next multi-trillion-dollar” company.

Nvidia likely needs that to be the case. OpenAI’s Stargate AI infrastructure project is the biggest in the sector and a crucial test of whether there is sufficient backing and demand to justify the planned investment.

“While AI is powered by Nvidia, OpenAI could indeed be the most important company in terms of the trillions in value its vision is supporting right now,” wrote Melius Research analyst Ben Reitzes in a recent research note. “We aren’t very concerned about OpenAI’s ability to raise all this money (into a rate-lowering cycle), we just hope they (and their rivals) get the power they need to keep this going.”

OpenAI last week launched a preview of its Pulse product to paying subscribers, a feature where ChatGPT proactively does research to deliver personalized updates based on a user’s chats, feedback, and connected apps.

“Pulse is the first step toward a new paradigm for interacting with AI that combines conversation, memory, and connected apps—perhaps it can help OpenAI sell ads and charge commissions in disruptive ways,” Reitzes wrote.

The Melius analyst predicts that OpenAI’s platform could
theoretically generate well over $40 billion in annual advertising revenue, based on comparisons with dominant search provider Google.

Write to Adam Clark at adam.clark@barrons.com