In its latest financial earnings report, chipmaker Nvidia Corp. (NASDAQ:NVDA) highlighted the uncertainty surrounding its $100 billion letter of intent with OpenAI.
Nvidia Stays Upbeat Amid OpenAI Deal Uncertainty
"There is no assurance that we will enter into definitive agreements with respect to the OpenAI opportunity or other potential investments, or that any investment will be completed on expected terms," Nvidia said in the risk factors section of its quarterly filing.
The chipmaker also mentioned that its potential $10 billion investment in Anthropic, is subject to certain closing conditions.
However, in the earnings call, CEO Jensen Huang showed optimism and called OpenAI a “once in a generation company.”
“I fully expect that investment to translate to extraordinary returns,” he added.
Nvidia posted third-quarter better-than-expected revenue of $57.0 billion, up 62% year-over-year, along with EPS of $1.30 versus expectations of $1.25. The quarter marked the company's 12th consecutive beat and delivered record revenue.
Huang’s AI Bet Faces New Pressure
The uncertainty surrounding Nvidia’s deal with OpenAI comes amid a broader debate about the sustainability of the AI industry’s current investment wave. Nvidia’s CEO, Jensen Huang, recently defended these massive AI investments, arguing that they are rooted in a historic shift in computing.
However, Nvidia’s investment plans in OpenAI in September, which were initially seen as a significant move to reinforce its dominance in the AI market, have faced challenges. In October, AMD’s multi-year deal with OpenAI was predicted to pose a serious challenge to Nvidia’s long-standing dominance. This deal was expected to unlock $135 billion in revenue for AMD and significantly raise its earnings estimates and price target.
Despite these challenges, Bank of America Securities analyst Vivek Arya had maintained a Buy rating on Nvidia in September, citing the potential for the OpenAI investment to generate billions in long-term revenue.
According to Benzinga Edge Stock Rankings, Nvidia has a growth score of 98.60% and a momentum rating of 84.06%. Click here to see how it compares to other leading tech companies.
NVDA Price Action: NVIDIA shares are up 4.88% at $186.52 during Thursday’s pre-market trading, according to Benzinga Pro data. On a year-to-date basis, it surged 34.86%
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