Chip giant Nvidia (NVDA) is reportedly nearing a deal to invest $20 billion in ChatGPT maker OpenAI, following reports of stalled negotiations. In a CNBC interview on Tuesday, CEO Jensen Huang stated that Nvidia is also considering investing in OpenAI’s next fundraising round and potential IPO (initial public offering).
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“There is no question about that… There’s no drama involved. Everything’s on track,” Huang said. NVDA stock fell 2.8% yesterday amid rising tensions between the two and is down 5.7% over the past five trading days.
The Sam Altman-led company is targeting up to $100 billion in a round valuing the AI startup at about $830 billion. Tech giant Amazon (AMZN) is eyeing up to $50 billion in investment, while Japanese conglomerate SoftBank (SFTBY) is also reportedly committing up to $30 billion.
Nvidia-OpenAI Relations Face Strain
Reports highlight strains between Nvidia and OpenAI, including Altman’s dissatisfaction with some of Nvidia’s latest AI chips. Reports suggest that Nvidia’s chips excel at model training but lack the speed for inferencing, posing a challenge for OpenAI’s Codex platform. Another report noted that Nvidia’s plans to invest up to $100 billion in OpenAI are stalled. Both CEOs have downplayed these issues, but OpenAI is pursuing alternatives and new partnerships.
If Nvidia’s latest deal goes through, it will position Nvidia among OpenAI’s largest investors, alongside Microsoft (MSFT) and SoftBank. Tech companies are willing to invest billions in OpenAI, believing that forging a partnership with the AI giant will help them get ahead in the AI race.
Is Nvidia a Good Buy Right Now?
Analysts remain highly optimistic about Nvidia’s long-term prospects. On TipRanks, Nvidia stock has a Strong Buy consensus rating based on 37 Buys, one Hold, and one Sell rating. The average Nvidia price target of $260.06 implies 44.2% upside potential from current levels. Over the past year, NVDA shares have surged nearly 52%.
