To The Moon

Nvidia's $100B OpenAI Play: Winning on Chips—and Equity

$NVIDIA(NVDA)$  's stock soared to a new high after news broke of its planned $100 billion investment in OpenAI, which intends to build and deploy a 10GW computing infrastructure.

This 10GW capacity is considered incremental, leading to a positive market reaction across the broader AI infrastructure sector, including key players like CoreWeave (CRWV), Applied Digital (APLD), as well as storage and power companies.

Nvidia's Ledger: Two Ways to Win

A closer look at the collaboration details reveals:

Nvidia will assist OpenAI in deploying the 10GW data center, with the project slated to commence in the second half of 2026, starting with the 'Rubin' generation of GPUs. Following the signing of an initial $10 billion cash contract, Nvidia will also acquire an equity stake in OpenAI. OpenAI's current valuation is estimated at $500 billion, with its user base now reaching 700 million.

~$100 Billion Investment Secures $350 Billion in Revenue

In August, Jensen Huang informed investors during an earnings call that constructing a 1GW data center capacity typically costs between $50 billion and $60 billion, with approximately $35 billion allocated to Nvidia chips and systems. The industry largely uses this guidance for estimations. Simple extrapolation suggests that a 10GW build-out would entail a $500 billion expenditure, from which Nvidia stands to gain $350 billion in revenue. Based on Nvidia's current net profit margin, this could translate to roughly $175 billion in net profit.

An investment of $100 billion yielding an estimated $175 billion in net profit, coupled with an equity stake in OpenAI.

~Deepened Ties: GPUs Counter ASICs

One of the primary motivations for hyperscalers and OpenAI to develop their own Application-Specific Integrated Circuits (ASICs) was to gain greater control over computing power and reduce their reliance on, or perceived coercion by, Nvidia.

However, the inherent risk with ASICs is that if their power efficiency significantly trails Nvidia's equivalent generation products, their production becomes economically unviable, rendering prior R&D investments effectively wasted. This introduces a substantial degree of uncertainty.

By bringing Nvidia into its ownership structure, OpenAI aims to deepen this strategic alliance, secure higher priority in GPU allocation, and mitigate the risk of future compute shortages.

According to CNBC, both companies stated that the investment would be deployed "gradually" as the infrastructure is built, with Nvidia becoming OpenAI's "preferred" supplier for chips and networking equipment.

Institutional Perspectives

Bernstein:

The industry remains in an incremental growth phase. Even if OpenAI now pursues in-house chip development, GPUs will retain significant importance, leading to a resurgence of GPUs in the GPU vs. ASIC debate. To some extent, these two technologies could coexist, with Nvidia GPUs potentially handling training tasks and ASICs focusing on inference.

DA Davidson:

Nvidia has become an "investor of last resort." This phrasing likely alludes to the concept of "lenders of last resort." Nvidia previously played a similar role during CoreWeave's IPO, and this investment in OpenAI carries a similar implication.

Morgan Stanley:

"10 GW is a large number, implying $350-400bn of revenue over an indeterminate period that will start with Vera Rubin in 2h26. We are not viewing this level of investment as a certainty but part of the framing of the longer-term bull case. For reference, the largest GPU clusters in use today are still in the hundreds of MWs."

Overall AI Infrastructure Benefits

$Taiwan Semiconductor (TSM.US)$ , which monopolizes high-end chip foundry and packaging, rose 3%, continuing to hit new highs.

Both of Nvidia's supported "NEOclouds" saw gains of approximately 7%. Among them, $CoreWeave (CRWV.US)$ broke above the upper trendline of its downward channel since June, while $NEBIUS (NBIS.US)$ continued its new high.

Data center operations and power resource stocks, represented by $Applied Digital (APLD.US)$ , saw even more significant gains. APLD surged 19%, $IREN Ltd (IREN.US)$ rose 8%, $Cipher Mining (CIFR.US)$ climbed 13%, and $Bitdeer Technologies (BTDR.US)$ increased 9%.

The recently strong storage sector extended its rally, with $Western Digital (WDC.US)$ up 5%, $Seagate Technology (STX.US)$ up 3%, and $Micron Technology (MU.US)$ up 1%.

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