"As the artificial intelligence (AI) revolution sweeps across industries, Nvidia ( NASDAQ:NVDA ) stands at its heart, its AI chips becoming the backbone of countless operations - from tech giants to startups. As demand surges, Nvidia's sales and profits are skyrocketing, with exponential growth fueled by multi-billion-dollar deals. Nvidia's second quarter data center segment - where it houses its AI business - saw revenue rocket 56% higher year-over-year to a record $41.1 billion, and now accounts for an astounding 88% of total sales."
"For example, CoreWeave ( NASDAQ:CRWV ) and OpenAI have signed massive agreements, including a new $6.5 billion expansion - bringing the pact's total value to $22.4 billion - for CoreWeave to provide AI data centers using Nvidia's chips and technology. These partnerships signal an unrelenting appetite for AI infrastructure, with data centers humming with Nvidia's GPUs. Yet, beneath this boom lies a question:"
"The recent deals between Nvidia, CoreWeave, and OpenAI raise eyebrows due to their interdependent structure. Nvidia's $6.3 billion commitment to buy CoreWeave's unsold cloud capacity through 2032, alongside CoreWeave's multi-billion-dollar deal with OpenAI, create a financial loop where each company supports the others' growth. Some analysts argue this isn't a major issue, suggesting these agreements ensure resource allocation and stabilize revenue amid AI's rapid expansion."
Nvidia's AI chips have become central to a wide range of operations, driving rapidly rising sales and profits as demand for AI infrastructure surges. The data-center segment generated $41.1 billion in revenue, a 56% year-over-year increase, and now represents 88% of total sales. Large-scale agreements, including CoreWeave's expanded pact with OpenAI and Nvidia's commitments to purchase unsold cloud capacity, interconnect the companies financially. Those commitments create circular flows of revenue and capacity that can stabilize allocation and revenue in the short term while also concentrating risk and potentially masking vulnerabilities in the AI supply chain.
Read at 24/7 Wall St.
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