Nvidia, the dominant producer of AI accelerator chips, has scrapped its earlier planned $100 billion investment in OpenAI in favor of a $30 billion contribution to the startup's current funding round, according to a report by the Financial Times. The decision marks a significant pivot in one of the most closely watched corporate relationships in the artificial intelligence sector.
The new investment, which is in the final stages of negotiation, is expected to be announced as soon as this weekend, the report said, citing unnamed people close to the matter. It forms part of a broader funding round that is set to raise more than $100 billion for OpenAI, valuing the company at $730 billion before the new capital infusion. Much of the $30 billion from Nvidia is expected to be reinvested in Nvidia's own hardware, reflecting a symbiotic relationship that has become a hallmark of the AI industry.
The Original $100 Billion Deal: A Tale of Skepticism
The original deal, announced with great fanfare in September 2024, was greeted with widespread skepticism from analysts and industry observers. Its circular structure — where Nvidia would invest in OpenAI, which would then spend much of that money on Nvidia's chips — raised eyebrows. The terms were vague, and many questioned how such a deal would generate long-term value for Nvidia shareholders beyond short-term revenue boosts.
Despite the skepticism, the announcement initially boosted investor enthusiasm, driving Nvidia's share price above $5 trillion for the first time a few weeks later. However, the deal was later reported to have stalled after progressing only to the stage of a memorandum of understanding. In January 2025, the Wall Street Journal reported that the deal was "on ice" amid increasing investor caution in the AI space, as the euphoria of the early AI boom began to give way to more sober assessments of returns and risks.
OpenAI's Financial Picture: Revenue Soars but Costs Mount
OpenAI's financial performance has been a mixed bag. The startup's annualized revenue run rate exceeded $20 billion earlier this year, driven by the widespread adoption of its generative AI models, including ChatGPT and the underlying GPT series. However, these revenues are dwarfed by the enormous commitments OpenAI has made to pay for AI infrastructure and chips. The company has commitments totaling approximately $1.5 trillion with providers including AMD, Broadcom, and Oracle, as well as Nvidia.
This massive spending reflects the capital-intensive nature of developing and scaling state-of-the-art AI models. Training large language models requires enormous clusters of specialized chips, data center capacity, and energy. OpenAI's leadership has repeatedly stated that the company's success depends on securing access to cutting-edge hardware and building the most advanced AI systems, which requires huge upfront investments.
The startup is also expected to hold a public offering sometime this year, which could provide additional capital and liquidity for early investors. The IPO is likely to be one of the most anticipated in the technology sector, given OpenAI's prominence and the intense interest in AI.
The Broader Funding Round: A Who's Who of Tech Titans
Nvidia's $30 billion commitment is not the only one in OpenAI's current funding round. SoftBank Group is expected to invest another $30 billion, leveraging its Vision Fund and deep pockets to gain exposure to the AI frontier. Amazon is reportedly considering an investment of up to $50 billion, which could be part of a broader deal that includes integrating OpenAI's models into Amazon Web Services and other Amazon products.
Other investors include MGX, a UAE-based technology investment firm, and Microsoft, which has been a long-time partner and major investor in OpenAI. Several venture capital firms are also said to be lining up investments. The combination of these investments, along with Nvidia's, would bring the total in the current round well above the $100 billion target, potentially making it one of the largest private fundraising efforts in history.
The presence of such a wide range of investors underscores the high stakes in the AI arms race. Companies are racing to secure access to the most advanced AI models and the infrastructure needed to run them. For Nvidia, the decision to replace a massive, long-term deal with a smaller but more immediate investment may reflect a desire for greater flexibility and less risk, while still maintaining a crucial relationship with a key customer and partner.
Industry Context: The AI Investment Landscape
The Nvidia-OpenAI saga is unfolding against a backdrop of rapid expansion and growing caution in the AI sector. Over the past two years, companies like Nvidia, AMD, and others have seen explosive growth in demand for AI chips, with Nvidia's data center revenue surging to record highs. However, investor sentiment has become more cautious as the technology matures and questions emerge about the sustainability of current spending levels.
Some analysts worry that the massive capital expenditures by companies like OpenAI, Microsoft, and Google may not generate commensurate returns for years, if ever. The hype cycle, while driving valuations, has also led to concerns about overinvestment and a potential bubble. Nvidia's own share price has experienced volatility as market expectations adjust.
Nevertheless, the underlying demand for AI capabilities remains strong. Enterprises across industries are integrating generative AI into their operations, from customer service chatbots to code generation tools. Governments are also starting to invest heavily in AI infrastructure to maintain competitive advantage. This suggests that companies like Nvidia and OpenAI will continue to be at the center of technological and economic transformation, even as the specific terms of their relationship evolve.
The cancellation of the $100 billion deal and the shift to a $30 billion investment can be seen as a recalibration. Nvidia is effectively choosing to remain a key supplier and investor, but without the outsized commitment that many considered risky. For OpenAI, the new round provides the capital it needs to continue its ambitious expansion while maintaining the partnerships that underpin its business model.
What's Next for Nvidia and OpenAI?
The revised investment plan is expected to close in the coming days, with both companies eager to put the uncertainty behind them. For Nvidia, this frees up capital that can be deployed elsewhere, possibly toward other AI startups or internal R&D. The company has been aggressively expanding its product lineup, including the next-generation Blackwell architecture, and maintaining its lead in the chip market.
For OpenAI, the funding round provides a crucial lifeline as it prepares for its IPO and continues to compete with rivals such as Anthropic, Cohere, and closed-source models from Google and Meta. The company is also exploring new frontiers, including reasoning models, multimodal AI, and potential breakthroughs in artificial general intelligence (AGI), which remains its stated long-term goal.
The relationship between the two companies will remain intertwined. OpenAI's massive computing needs ensure that Nvidia will continue to be a primary beneficiary of its growth, even without the original $100 billion deal. And Nvidia's investment, though smaller, signals continued confidence in OpenAI's trajectory and the broader AI ecosystem.
Source: Silicon UK News