The apparent collapse of a much-discussed $100bn deal between Nvidia and OpenAI has sent ripples through the AI economy, raising questions about the sustainability of circular funding arrangements and who will ultimately bear the cost of AI's expansion. The deal, announced last September, would have seen the chipmaker supply the ChatGPT developer with funds largely destined for the purchase of Nvidia's own chips.
According to the Wall Street Journal, negotiations had not progressed, with Nvidia's chief executive, Jensen Huang, privately emphasising that the deal was non-binding and not finalised. Huang later told reporters in Taipei that Nvidia would make a "huge" investment into OpenAI's next funding round, but "nothing like" $100bn. A Reuters report suggested the feeling was mutual, with OpenAI said to be "unsatisfied" with Nvidia's advanced AI chips and seeking alternatives. Nvidia's stock has taken a 10% hit this week.
Both companies have moved into damage control. Sam Altman, OpenAI's CEO, wrote on X: "We love working with Nvidia and they make the best AI chips in the world. We hope to be a gigantic customer for a very long time." An OpenAI spokesperson referred to Altman's post and remarks by Huang, who told CNBC: "There is no drama." The spokesperson added: "Our teams are actively working through details of our partnership. Nvidia technology has underpinned our breakthroughs from the start."
Oracle, which has a $300bn cloud computing deal with OpenAI, said it still expects the startup to meet its commitments even without the full Nvidia investment. "The Nvidia-OpenAI deal has zero impact on our financial relationship with OpenAI," Oracle posted on X. "We remain highly confident in OpenAI's ability to raise funds and meet its commitments."
Alvin Nguyen, an analyst at Forrester, said there were solid business reasons behind the shake-up. OpenAI's ambitious growth trajectory makes it difficult to stick with a single vendor, especially as it plans new computationally demanding models. "They need chips. They need as many as possible," he said. For Nvidia, Nguyen noted that the company would not discourage overhype, as it helps drive chip sales. "You don't know what's going to happen, and so you let other people put numbers out there and let that drive the hype."
The episode comes against a backdrop of a changing investment landscape for AI, where hype is giving way to realities about what aspects of the technology will actually generate revenue. This week has also seen a sell-off in software stocks, prompted in part by the launch of a new Anthropic AI tool capable of carrying out professional services, fuelling fears of disruption to existing business models.
