Nvidia and OpenAI: a $20 billion marriage of convenience

The AI market has long resembled a closed club where everyone is both friend and creditor to everyone else. The news that Nvidia plans to pour $20 billion into OpenAI looks like the logical end of that chain. Jensen Huang isn't just writing a check; he is buying insurance on a future in which everyone needs his chips, but above all the most advanced player on the field. If the deal closes, it will be the largest investment in the history of a company that, just a couple of years ago, was associated almost exclusively with graphics cards for gamers.

Let's recall how we got here. OpenAI burns cash faster than GPT-4 generates text. Training models requires thousands of H100 and B200 accelerators, each costing as much as a decent car. Sam Altman has long hinted at raising hundreds of billions of dollars to build his own chip fabs and escape the shortage. Now Nvidia steps in. Why would it? The answer is obvious: so that Altman doesn't have to build those fabs. Why reinvent the wheel when you can simply become a co-owner of whoever is riding it fastest?

The deal creates a remarkable closed loop in Silicon Valley's economy. Nvidia earns record profits from selling GPUs. It then takes part of those profits and invests them in its biggest customer, OpenAI. OpenAI, in turn, uses that money to buy even more GPUs from Nvidia. This isn't just business; it is a perpetual motion machine that leaves competitors like AMD and Intel far behind. While they try to prove their chips are just as good, Nvidia simply takes the whole market, becoming not merely a supplier but a strategic partner.

It is interesting to see how Microsoft views this. Satya Nadella spent years building a special relationship with OpenAI, investing more than $13 billion in it. Now the "iron king" has entered the game, and his stake outweighs everything that came before. That may create some tension inside the alliance. On the other hand, if OpenAI becomes even more powerful, everyone at this closed party benefits. But there is a flip side: antitrust regulators. In the US and Europe, they already eye Nvidia's dominance with suspicion. A direct investment of this size in the market leader in software is a red rag to any official charged with protecting competition.

We are entering an era in which the boundaries between making hardware and developing algorithms are dissolving. Nvidia understands that simply selling cards is a risk. Tomorrow someone may come up with a more efficient architecture or find a way to get by with less memory.

But if you own part of the company that dictates industry standards, you will always stay one step ahead. Jensen Huang is playing the long game, turning Nvidia into something like a Standard Oil of the digital age, only with computing power in place of oil. Every country now wants its own sovereign AI, and OpenAI is the main asset in that race.

By investing such sums, Nvidia effectively takes on the role of financial guarantor of technological superiority.

The bottom line: Nvidia is closing the AI production loop around itself. If the deal goes through, OpenAI will effectively become an in-house lab for Nvidia chips, and Sam Altman will have to set aside his dreams of his own fabs for a while. The question is whether this alliance will prove too toxic for regulators.