Nvidia Corp. (NASDAQ: NVDA | NVDA Price Prediction) invests in a company that will spend the money on data centers. The data centers will buy Nvidia chips. Investors should worry about how much of this is Nvidia getting revenue it might not receive without the transactions.
The Nvidia $100 billion investment in OpenAI is the most recent worrisome transaction. Bloomberg described the deal as “a way to prop up the market and keep companies spending on its products.” Analyst Stacy Rasgon of Bernstein Research pointed out this practice.
A Worrisome Practice?
In August, Nvidia disclosed that a large portion of its revenue from the previous quarter was from two unidentified customers. The company gave them special designations in an SEC filing. “Customer A” made up 23% of total revenue, and “Customer B” comprised 16% of total revenue. It is unclear why the company did not name the customers. The revenue showed up in Nvidia’s “Compute & Networking segment,” the SEC filing showed.
Nvidia could make the argument that it is simply investing to help companies support transactions they would have made anyway. Another investor would have paid the revenue it received from these transactions. What would be different is that another large tech company or outside institutional investors would have seen the transaction only as a way to push up the valuation of their Nvidia equity ownership. The revenue benefit to them would be zero.
It is hard to say how many deals like the new OpenAI transaction industry observers or investors might flag. Sam Altman, CEO of OpenAI, announced an $850 billion infrastructure expansion. Oracle, Nvidia, and Softbank will help fund this deal. AI server farm expansion also helps Oracle’s sales. A CNBC reporter wrote, “Those companies are simultaneously investing in the same projects and then getting paid back through chip sales and data center leases.”
The more scrutiny these deals receive, the more likely investors are to ask themselves how much Nvidia’s revenue would grow without them. The answer is almost certainly less.
Nvidia Price Prediction and Forecast 2025-2030
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