Wall St. Scrutinizes Nvidia’s Deal Machine
Investors are awaiting the chipmaker’s latest quarterly earnings — and are anxious about its huge portfolio of artificial intelligence investments.
Inside the central bank of A.I.
Wall Street will be paying close attention when Nvidia reports earnings on Wednesday, looking for clues about the future of the artificial intelligence boom.
But beyond the quarterly numbers, investors will scrutinize Nvidia’s expanding portfolio of A.I. investments as skeptics question the company’s efforts to undergird the industry’s trillion-dollar ecosystem. Sri Muppidi digs into the details.
Nvidia has ramped up its investments in start-ups, money that could then be spent on its own chips. Those deals are made through its corporate development arm and a venture capital arm, NVentures.
The investments include more than $30 billion in OpenAI and commitments for up to $10 billion in Anthropic, as well as stakes in cloud computing providers and data center operators.
In the last week alone, it has announced:
- A $1.5 billion investment in SB Energy, a SoftBank subsidiary building one of the world’s largest data centers
- An investment in the data center software company Emerald AI at a $1.05 billion valuation
The company’s total stakes in private companies, included as nonmarketable securities on its balance sheet, stood at $43 billion as of April 26. That’s roughly double from the previous quarter.
Nvidia has also taken large stakes in publicly traded companies. That includes $5 billion worth of Intel stock that Nvidia bought last fall as part of a data center venture, a stake now worth about $22 billion.
Nvidia also holds sizable stakes in start-ups that have since gone public, including SpaceX and CoreWeave. Its total marketable securities stood at about $30 billion in the first quarter, up more than double from the previous quarter.
Nvidia has used its financial firepower in other ways, too. It recently announced a $500 billion partnership with Wall Street giants to help A.I. companies get cheaper access to computing power, which could go toward buying more Nvidia chips.
But some analysts are worried that Nvidia could become the central bank of the A.I. economy. The investments in the chipmaker’s own customers have raised concerns that the deals amount to vendor financing that could be unsustainable and possibly dangerous.
“At the end of the day, these customers don’t have the credit profile to support the revenue profile that they want to achieve,” James Kisner, an analyst at Water Tower Research, said. He added, “You’re betting on the customer’s solvency.”