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Nvidia‘s OpenAI Investment Faces Scrutiny as Competition Heats Up
Nvidia’s planned investment in OpenAI, initially reported as $100 billion, has come under scrutiny amid reports of internal doubts and concerns about OpenAI’s business practices. The wall Street Journal report on Friday said Nvidia insiders had expressed doubts about the transaction and that Huang had privately criticized what he described as a lack of discipline in OpenAI’s business approach. The Journal also reported that Huang had expressed concern about the competition OpenAI faces from Google and Anthropic. Huang called those claims “nonsense.”
Nvidia shares fell about 1.1 percent on Monday following the reports. Sarah Kunst, managing director at Cleo Capital, told CNBC that the back-and-forth was unusual.”One of the things I did notice about Jensen Huang is that there wasn’t a strong ‘It will be $100 billion.’ It was,’It will be big. It will be our biggest investment ever.’ And so I do think there are some question marks there.”
In September, Bryn Talkington, managing partner at Requisite Capital Management, noted the circular nature of such investments to CNBC. “Nvidia invests $100 billion in OpenAI,which then OpenAI turns back and gives it back to Nvidia,” Talkington said. “I feel like this is going to be very virtuous for Jensen.”
Tech critic Ed Zitron has been critical of Nvidia’s circular investments for some time, which touch dozens of tech companies, including major players and startups. They are also all Nvidia customers.
“NVIDIA seeds companies and gives them the guaranteed contracts necessary to raise debt to buy GPUs from NVIDIA,” Zitron wrote on Bluesky last September, “Even though these companies are horribly unprofitable and will eventually die from a lack of any real demand.”
Chips from other places
Outside of sourcing GPUs from Nvidia, OpenAI has reportedly discussed working with startups Cerebras and Groq, both of which build chips designed to reduce inference latency. But in December 2023, Nvidia struck a $20 billion licensing deal with Groq, which reuters sources say ended OpenAI’s talks with Groq. nvidia hired Groq’s founder and CEO Jonathan ross along with other senior leaders as part of the arrangement.
In January 2024, OpenAI announced a $10 billion deal with Cerebras instead,adding 750 megawatts of computing capacity for faster inference through 2028.Sachin Katti, who joined OpenAI from Intel in November to lead compute infrastructure,
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