Nvidia, OpenAI stalled on their mega deal. AI giants need each other

Nvidia CEO Jensen Huang and OpenAI CEO Sam Altman met on CNBC in September to announce a massive $100 billion deal that will open a new chapter in the emerging artificial intelligence industry.

Five months have passed and no contract has been signed and no money has changed hands. It appears that the two companies that are more concerning to investors are in conflict.

Wall Street Journal on Friday reported Negotiations between the companies were stated to be “on ice” after some at Nvidia expressed doubts about OpenAI’s business model. This has been a major topic of discussion in artificial intelligence since November, when Nvidia warned of risk factors in its quarterly report that “there is no assurance that we will enter into definitive agreements regarding the OpenAI opportunity or other potential investments.”

Despite the reported friction, Nvidia and OpenAI still need each other.

Altman said OpenAI needs lots of Nvidia’s AI chips to hit its revenue growth goals, while Huang is relying on customers like OpenAI to build services that wow customers and continue to increase sales of its costly systems.

Rising demand and industry excitement have caused Nvidia’s market capitalization to surpass $5 trillion at its peak in October, but the stock has fallen 15% from its high, pushing the valuation to $4.4 trillion. OpenAI, meanwhile, was valued at $500 billion in the private market late last year and is reportedly eyeing a valuation of over $800 billion for another round of cash.

“We’re looking forward to Sam closing out, and he’s doing terrific,” Huang told CNBC’s Jim Cramer on Tuesday. “And we will invest in the next round. There is no doubt about that.”

Nvidia first invested in OpenAI in October 2024 as part of a $6.6 billion funding round.

Huang added on Tuesday that there was “no drama” in the relationship with OpenAI, as Altman put it in a speech a day earlier. to post In X.

“We expect to be a huge customer for a very long time,” Altman wrote. “I don’t understand where all this madness is coming from.”

Yet little progress was apparent when it came to the landmark agreement in September that saw OpenAI build infrastructure requiring 10 gigawatts of power.

Nvidia’s initial investment of $10 billion will be deployed once the first gigawatt is completed, CNBC reported at the time of the deal. The companies said that the first phase of the latest investment will come into operation in the second half of 2026.

OpenAI’s current fundraising round, which Huang said would include Nvidia’s participation, is not part of last year’s round. Huang told Cramer that Nvidia would consider additional investments in OpenAI and would like to participate in the AI ​​lab’s IPO.

Nvidia shares fell nearly 3% on Tuesday, sparking a broader decline in tech stocks and falling for three straight days.

Huang told Joe Rogan in December that OpenAI was the first organization looking to use Nvidia’s AI system, called DGX, back in 2016 when it was a little-known, nonprofit lab. report.

In the following years, OpenAI became a heavy user of Nvidia chips, often supplied through . Microsoft infrastructure. In February 2023, months after ChatGPT was released, Huang appeared enthusiastic about Nvidia’s earnings call, praising OpenAI and boasting that generative AI was transforming his company.

“Everyone who’s developing software is either being warned, shocked by the warning, or actively working on something like ChatGPT to be integrated into their applications,” Huang said as his company’s stock price soared.

Nvidia’s parabolic growth coincides with OpenAI’s explosion.

Nvidia generated $6 billion in revenue in the quarter in which ChatGPT was released. In the period ending last October, this figure increased almost tenfold to $57 billion. Analysts say the chipmaker has more than 90% of the market for graphics processing units, or GPUs.

ChatGPT is the leading chatbot by usage. Reaching 800 million weekly users late last year. In January, the company announced it was on track to reach $20 billion in annual sales, but analysts do not predict that figure will increase snowy By 2030.

At the heart of the tension, which both companies deny exists, is how each has diversified by partnering with the other’s rivals.

With its balance sheet swollen and in need of more customers, Nvidia used its cash to invest in many of its key partners; This includes a $10 billion commitment. in november To Antropik. Investors want Nvidia to team up with larger buyers due to its heavy concentration of customers with several hyperscalers.

At the same time, OpenAI has made several announcements with other semiconductor companies, saying it needs more computing power than Nvidia can provide on its own.

In June, Altman appeared Advanced Micro Devices CEO Lisa Su at the chipmaker’s annual event in San Jose, California. Altman said OpenAI will help AMD develop and become a customer for its next-generation AI chips. AMD is the only company other than Nvidia that makes a large data center GPU for AI.

Four months later, OpenAI announced a partnership with broadcomhelps create custom AI chips including Google’s tensor processing units. And last month OpenAI said it would use chips from startup Cerebras With a deal worth more than 10 billion dollars.

As reports swirl about difficulties emerging in the OpenAI-Nvidia relationship, OpenAI infrastructure manager Sachin Katti I took it to X On Monday, he will describe his company’s partnership with the chip giant as “fundamental.”

“Our entire fleet of computers runs on Nvidia GPUs,” Katti wrote. “The demand curve is clearly there. The world needs a lot more calculations.”

WRISTWATCH: Nvidia and OpenAI respond to reports about their relationship