Bank of America explains why Nvidia almost has to invest in OpenAI and Intel
Nvidia is in the business of giving tech bigwigs the tools to try to create God, and in the process, the chip designer has made more money than God.
Bank of America analyst Vivek Arya believes the company is poised to generate hundreds of billions in free cash flow over the next few years as it benefits from the AI boom. Management has to do something with all that money, which helps explain recent investments in OpenAI and Intel, in his view.
“Unlike the old days, investing in other public assets has become difficult given lack of strategic fit and the burdensome regulatory process,” he wrote. “Hence the only other alternative (beyond returning to investors) is to invest in the ecosystem to expand the size of the addressable opportunity that could multiply future benefits, or accelerate time to market for new products, and/or for geopolitical benefits (such as recent INTC investment).”
Investing in its customers is just another way of investing in its own success. And investing in the likes of Intel is a way to add some depth to its product shelf, and perhaps curry some political favor in the process.
Nvidia has been doing this up and down the supply chain, with investments in Applied Digital, Arm Holdings, CoreWeave (which is acquiring Core Scientific), and Nebius Group.
To re-up my previous thoughts on Nvidia’s “House of GPUs,” this degree of implicit vertical integration and platform deepening can be best understood as CEO Jensen Huang trying to ensure that all the possible near-term demand for AI that can be met is met through Nvidia, one way or another.
And accelerating time to market may not be the most desired outcome; as long as Nvidia’s offerings continue to be considered market-leading, advancing too quickly may effectively short-circuit the length of product cycles.
