“So much money!” Nvidia has nowhere to invest; instead of buying back shares, it would be better to choose to “let AI form a closed loop.”
```
Nvidia, flush with massive cash reserves, is attempting an entirely new approach to capital deployment—investing tens of billions of dollars into key customers, partners, and even competitors to build a self-sustaining "AI closed-loop ecosystem," thereby securing long-term demand for future chips.
The most eye-catching move is Nvidia’s recent announcement of a planned investment of up to $100 billion in OpenAI to support large-scale data center expansion. This initiative is not only a strong show of support for OpenAI, but also reflects Nvidia CEO Jensen Huang’s core strategy—using a powerful balance sheet and market confidence to consolidate the entire AI industry chain.
Once the news was released, the market responded enthusiastically: Nvidia’s market capitalization soared by nearly $160 billion in a single day. This investment not only alleviated external concerns regarding OpenAI's financial health, but also demonstrated the so-called "circularity" business model: Nvidia invests in startups, and these companies turn around and use the funds to buy Nvidia chips.
This model is not limited to OpenAI. From cloud service provider CoreWeave to competitor Intel, and to Musk’s xAI, Nvidia’s investment footprint now stretches into every corner of the AI realm.
The Problem of "Too Much Money"
For most companies, abundant cash is a good thing, but for Nvidia, it has become a unique problem. According to FactSet data, Nvidia generated $72 billion in free cash flow over the past four quarters, and this fiscal year is expected to reach nearly $100 billion—apart from Apple, no other tech giant can compare.
The question is, how to spend it?
Acquisitions are almost impossible. As early as the 2020 Mellanox acquisition, Nvidia encountered regulatory resistance. In the current geopolitical climate, large-scale chip mergers and acquisitions are almost impossible to get easily approved. Furthermore, Jensen Huang personally prefers a flat organizational structure and leans toward small-scale technical integration.
Buybacks and R&D can't absorb it. Nvidia spent nearly $50 billion on buybacks in the past four quarters and announced an additional $60 billion plan, but this is still not enough to stem the influx of cash. Although R&D spending has doubled in two years, its share of revenue has actually dropped to 9%, much lower than the previous 22%.
Strategic Investment: Customers, Partners, Even Competitors
With traditional paths limited, Nvidia has chosen to use strategic investment to build an internal circulation AI ecosystem.
The $100 billion investment commitment to OpenAI is at the core. According to NewStreet Research, for every $10 billion Nvidia invests in OpenAI, the latter will spend $35 billion buying Nvidia chips. Although such deals might lower Nvidia’s per-chip profit margin, they ensure ongoing demand and provide a "lifeline" for cash-strapped AI companies.
Other investment cases include:
CoreWeave: Nvidia holds a 7% stake; the two recently signed a $6.3 billion agreement under which Nvidia commits to buying back unused cloud capacity, further tightening key client relations.
Intel: Nvidia unexpectedly invested $5 billion in its old rival, collaborating to develop new products that allow GPUs to integrate more smoothly with Intel CPUs, seizing the chance to expand in the PC market.
xAI: Musk’s xAI has long regarded Nvidia as a strategic investor. In March this year, Nvidia and xAI—along with other partners—joined a multi-billion-dollar AI data center and energy initiative.
Win-Win Chess Game: Stabilizing Demand and Lowering Financing Costs
This investment play is, in essence, a win-win move by Nvidia—it stabilizes its own future demand while helping partners lower financing costs.
For Nvidia, the immediate benefit is locking in vast, stable chip orders for the coming years, avoiding demand fluctuations. For partners like OpenAI, Nvidia's endorsement serves as a massive credit guarantee.
Notably, OpenAI is projected to incur cumulative losses as high as $44 billion by 2029, in addition to huge spending on chip procurement and data center leasing. Before Nvidia's involvement, OpenAI faced financing rates as high as 15%, which reflected the market's distrust of its business model; projects endorsed by Microsoft, on the other hand, enjoyed rates of only 6–9%. Moody’s even revised Oracle’s outlook from “stable” to “negative” due to Oracle’s heavy dependence on OpenAI.
Nvidia’s entry changed everything. Thanks to the capital market’s "nearly unbreakable confidence" in Nvidia, the company can directly use its balance sheet—or even new share issuances—to support AI infrastructure projects at costs far lower than external financing. Industry insiders expect this will significantly lower OpenAI’s credit risk and allow it to secure loans at much lower rates.
Risk Warning and DisclaimerThe market involves risks; investment should be cautious. This article does not constitute personal investment advice nor take into account any individual user’s particular investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk. ```