"The math doesn't add up. Nvidia Corp. ( NASDAQ: NVDA) will put $100 billion into OpenAI and $7 billion into Intel. OpenAI may need more money later to buy more Nvidia chips and further build out data centers. Nvidia has become the banker to the world of artificial intelligence (AI). However, it had $84 billion in cash and securities on its balance sheet at the end of the last quarter."
"Microsoft, Meta, and Amazon have said that, altogether, they will put over $150 billion into data center buildouts this year. Those investments will grow as they put more data centers online. Nvidia sales will benefit from these buildouts. In a way, it could be said that data center chip sales will be so huge that Microsoft and its competitors are funding the Nvidia cash machine."
"Nvidia's investment in OpenAI also will fund a huge growth in data centers, each of which needs billions of dollars of its chips. Nvidia is getting part of its money back through these purchases. Nvidia is largely counting on the AI boom to continue at a rapid pace, and its stock price reflects that expectation. It is the only company with a market cap of over $4 trillion. Its stock is up 1,367% in the past five years."
Nvidia will invest $100 billion into OpenAI and $7 billion into Intel. OpenAI may need additional capital later to buy more Nvidia chips and expand data centers. Nvidia held $84 billion in cash and securities at the end of the last quarter and generated $26 billion in operating cash flow, which may need to grow faster to support current investments. Other investors, including private equity and Microsoft, Meta, and Amazon, plan large data-center buildouts totaling over $150 billion this year, increasing demand for Nvidia chips. Nvidia expects to recoup some investment through chip purchases and benefits from its rising stock valuation.
Read at 24/7 Wall St.
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