Nvidia's OpenAI Stumble: A Catalyst for a Re-Rating?

The immediate event is a stalled plan. In September, Nvidia announced a letter of intent to invest up to $100 billion in OpenAI to fund new AI infrastructure. The goal was ambitious: to help OpenAI build data centers with a capacity of at least 10 gigawatts of power-equivalent to the peak electricity demand of New York City. This was framed as a strategic bet to cement Nvidia's dominance in the AI supply chain.

That plan has now hit a wall. According to a report last week, the investment plan has stalled after some inside the chip giant expressed doubts about the deal. The catalyst is the emergence of internal skepticism at Nvidia, which has frozen a multi-year, multi-billion dollar commitment.

The core question is whether this changes Nvidia's trajectory. The company's own CEO, Jensen Huang, has already framed the deal's fate. He told reporters that the plan was "never a commitment" and that any future funding would be considered "one step at a time." This public statement, made after the internal doubts surfaced, is a clear attempt to manage expectations and distance Nvidia from a binding obligation. It suggests the company is treating the OpenAI partnership as a series of discrete, negotiable moves rather than a fixed, long-term capital allocation.

For investors, the stall removes a potential overhang of massive future cash outlays. But it also raises a tactical question: does this event create a temporary mispricing? The market's initial reaction to the news was muted, but the event itself-highlighting internal caution on a deal that was never formally committed-could be a signal that Nvidia's growth narrative is facing its first real internal friction.

Strategic Impact: Partnership vs. Pure Play

The stalling of the $100 billion plan is less a strategic pivot and more a tactical recalibration. The core friction, as reported, stems from internal Nvidia concerns about OpenAI's business strategy and a lack of discipline, alongside worries about competition. This is a bet on a partner's execution, not a loss of Nvidia's technological edge. The company's primary revenue driver remains its AI chip sales to a broad ecosystem of cloud providers and enterprises, not a single partnership. That dominance is intact.

The revised focus on a smaller, tens-of-billions equity investment keeps Nvidia engaged without the massive capital commitment. CEO Jensen Huang has publicly dismissed the friction as "nonsense," while privately emphasizing the deal's nonbinding nature. His comments that the investment will be "huge" but "probably the largest investment we've ever made" and that he "will absolutely be involved" signal continued deep partnership, just on a more manageable scale. The goal is to maintain access to OpenAI's scaling without overextending Nvidia's balance sheet.

This event doesn't change the fundamental setup. Nvidia is still the indispensable hardware layer for the AI infrastructure boom, with extraordinary growth and a dominant software and connectivity moat. The stall simply removes a potential overhang of future cash outlays, freeing capital for other opportunities. For now, the strategic impact is a clarification: Nvidia is a pure-play on AI compute, and its partnership with OpenAI is one lever among many, not the entire engine.

Financial & Valuation Implications

The stalling of the $100 billion plan is a balance sheet event, not a performance event. The deal was a potential future cash outlay that has now been removed from the equation. For a company with a market cap of $4.6 trillion, the immediate financial impact is negligible. The real significance is in removing a speculative drag on the balance sheet and freeing capital for other uses. The event noise is loud, but the underlying financials remain robust.

Nvidia's core performance is still extraordinary. Last quarter, revenue surged 62% year-over-year to $57 billion, a nearly tenfold increase from the same period two years prior. This growth is powered by the ongoing AI infrastructure buildout, where Nvidia remains the indispensable hardware layer. The company's financial strength is evident in its gross margin of 70.05% and its ability to fund rapid expansion in new areas like networking, which grew 162% last quarter.

Valuation-wise, the market has already priced in this growth. Nvidia trades at a forward P/E of around 24 times based on 2026 consensus earnings, with a PEG ratio of 0.65. A PEG below 1 suggests the stock is trading at a value relative to its growth rate. The stalled deal doesn't change this setup. It simply removes a potential overhang of massive future commitments that could have pressured the balance sheet or required dilution. The valuation now reflects Nvidia's standalone growth trajectory, which is still on a steep upward path.

The bottom line is that this event is a tactical reset, not a fundamental shift. The $100 billion deal was a speculative bet on a partner's future needs. Its stalling clarifies that Nvidia is managing its capital prudently, one step at a time. For investors, the catalyst has removed a minor uncertainty, leaving the stock to be judged on its own formidable financial performance and growth runway.

Catalysts & Risks: What to Watch

The immediate event is noise, but the setup is clear. The stalling of the $100 billion plan is a tactical adjustment, not a strategic retreat. The key for investors is to monitor the next formal steps, which will confirm whether this is a minor hiccup or a signal of deeper friction.

The first catalyst to watch is any official announcement of a scaled-down investment. CEO Jensen Huang has already dismissed the friction as "nonsense" and affirmed that Nvidia will "definitely participate" in OpenAI's next funding round, calling it "such a good investment." He also stated the investment will be "huge" and "probably the largest investment we've ever made," but explicitly ruled out the original $100 billion figure. The market will be looking for specifics: a formal equity commitment in the "tens of billions" range, as reported, or a new partnership structure that clarifies the revised terms. This will be the clearest signal that the relationship is being recalibrated, not abandoned.

The second near-term test is Nvidia's next earnings report. Management commentary on AI infrastructure spending trends will be critical. Any shift in tone regarding the pace of customer buildouts or competitive dynamics could challenge the thesis that this is purely a partner-specific adjustment. The company's own networking division, which grew 162% last quarter, shows its broader AI play is accelerating. If earnings show continued strength across its ecosystem, it will reinforce that the OpenAI friction is an isolated, tactical issue.

The key risk is if the stalling signals a broader loss of confidence in Nvidia's ability to secure major AI partnerships. This is the scenario where internal doubts at Nvidia become a market narrative. However, current evidence points to a tactical adjustment. The partnership remains active, with OpenAI stating Nvidia "will remain central as we scale what comes next." The investment is being restructured, not terminated. The real competitive risk lies in other chipmakers gaining ground, not in a broken partnership with OpenAI.

For now, the event-driven setup is straightforward. The catalyst has removed a speculative overhang. The next moves-a formal scaled-down deal and strong earnings-will confirm whether the market's initial muted reaction was correct.