Nvidia's OpenAI Pledge of $100 Billion Was 'Never a Commitment,' Says Huang

Nvidia’s potential $100 billion investment in OpenAI has stalled, according to reports. The Wall Street Journal said the deal has faced delays since it was announced in September. Nvidia CEO Jensen Huang has made it clear that the investment is not binding.

The market is reacting to these developments. Nvidia shares fell about 1.3% in premarket trading on Monday. Other semiconductor companies, including AMD and Marvell Technology, also experienced similar declines. The broader AI sector appears to be under pressure as investors question the long-term profitability of AI infrastructure.

Nvidia has not ruled out investing in OpenAI. Huang said in Taipei that the company is still planning to participate in OpenAI’s latest funding round. However, he suggested the investment may not reach the $100 billion figure reported earlier.

Why Did This Happen?

Nvidia’s hesitation reflects concerns about OpenAI’s competitive position. The company is facing stiff competition from AI model developers like Google and Anthropic. Huang emphasized that the investment agreement was never a firm commitment.

Nvidia made a similar point in its quarterly filing. The company warned that no definitive agreements had been reached and that the investment may not proceed on the expected terms. This language has fueled market uncertainty.

How Did Markets React?

The tech sector is showing signs of unease. Nvidia shares have gained 2% so far this year, but the stock is down about 2% in premarket trading. Semiconductor companies and cloud computing firms linked to OpenAI are also affected.

OpenAI itself is in the process of securing a $100 billion funding round. This could value the company at around $830 billion, according to Reuters. The company is in talks with major investors including Amazon, Microsoft, and SoftBank.

What Are Analysts Watching Next?

Analysts are examining the economic model of the AI boom. The business of AI infrastructure is built on high costs and limited revenue per gigawatt. OpenAI has agreements to deploy multiple gigawatts of AI infrastructure, each costing $50 billion to build.

Richard Windsor of Radio Free Mobile argues that the current model is not viable. He points out that AI infrastructure costs are rising, but revenue per gigawatt remains capped. This dynamic makes it difficult to generate profit or return capital to investors.

Nvidia remains a key player in this ecosystem. The company is still expected to supply AI chips for OpenAI’s projects. Huang has said Nvidia will invest “a great deal of money” in the AI startup, but not necessarily $100 billion.

The broader AI industry is facing a potential slowdown. If funding and investment dry up, AI model pricing could rise. This would affect the affordability and adoption of AI tools across various industries.

For now, the AI boom continues to attract massive investment. However, the market is beginning to question whether these high-cost, high-risk ventures will deliver long-term returns. Investors are watching closely as the sector navigates these challenges.