Nvidia’s Equity Investments Surpass $40 Billion: Empire-Building or Circular Demand? What's the Stock Impact?

TradingKey - Leveraging its GPU products that underpin the training and operation of modern artificial intelligence systems, Nvidia ( NVDA) has long established a firm foothold in the AI sector. Robust market demand for these chips has not only propelled the company's market capitalization past $5 trillion but has also generated tens of billions of dollars in annual free cash flow. Currently, Nvidia is deploying this abundant capital into nearly every field related to AI infrastructure.

This year, Nvidia has committed a cumulative total of over $40 billion in investments to cloud service providers, data center operators, optical networking firms, manufacturing partners, and AI model developers. Notably, many of these investments are accompanied by commercial cooperation agreements related to the deployment of Nvidia hardware or infrastructure construction, deeply integrating capital allocation with business development.

To ensure stable hardware demand and efficient production capacity, Nvidia is comprehensively positioning itself across the entire AI industry chain, with its reach now extending into areas such as chip R&D, photonics, cloud services, and AI model development.

Which companies has Nvidia invested in?

According to statistics, NVIDIA has reached investment cooperation agreements totaling billions of dollars with no fewer than seven listed companies this year. At the same time, it has also participated in more than 20 rounds of investment layouts targeting unlisted companies, including many deals for early-stage startups.

NVIDIA founder and CEO Jensen Huang stated in an April podcast that there are so many excellent and amazing foundation model companies in the market that NVIDIA is attempting to invest in all of them; they are not picking winners but instead need to support every company.

How much "hidden strategic leverage" has equity investment secured for Nvidia?

As the absolute leader in the AI chip sector, NVIDIA's GPU business has experienced explosive growth amidst the AI wave. While its GPU business remains in an upward phase, NVIDIA has aggressively deployed equity investments, positioning them as its "second growth curve."

From a capital standpoint, NVIDIA's GPU business has generated extremely abundant cash flow, with free cash flow reaching $97 billion in the last fiscal year, providing a solid financial foundation for its large-scale equity investments. Holding massive cash reserves, NVIDIA needs to find channels to maximize the value of its capital, and equity investment perfectly aligns with its strategic direction of expanding its ecosystem and consolidating its advantages.

From the perspective of strategic layout, NVIDIA's equity investments are not a matter of casting a wide net blindly, but are centered around the core objective of building a complete AI ecosystem.

On one hand, it invests in AI model companies—such as injecting $30 billion into OpenAI and participating in funding rounds for Anthropic and xAI—to ensure these enterprises continue to use NVIDIA GPUs when developing large models, thereby locking in long-term hardware demand. On the other hand, it extends to upstream supply chain companies, investing in firms like Corning and Marvell Technology to accelerate R&D of key technologies and capacity building, addressing supply bottlenecks in areas such as optical components and silicon photonics, and ensuring the stability and sophistication of its own hardware production. Simultaneously, investing in data center operators like IREN is intended to ensure sufficient computing power to carry AI workloads, further consolidating NVIDIA's dominant position in the AI infrastructure sector.

Equity investments have also brought direct financial returns to NVIDIA, becoming a new growth driver for profits. For instance, regarding NVIDIA's investment in Intel, as Intel's stock price has surged over 200% this year, the floating profit on this $5 billion investment has approached $22 billion, far exceeding the profit contribution of some of its traditional businesses. Such investment gains not only bolster the company's financial statements but also provide more capital support for subsequent strategic moves.

Furthermore, through equity investments, NVIDIA has been able to deepen its ties with ecosystem partners, building an unshakeable "competitive moat." It has formed deep synergies with investee companies in areas such as technical R&D and commercial cooperation—for example, collaborating with Corning to advance co-packaged optics technology and with IREN to deploy NVIDIA-branded infrastructure. These collaborations not only improve the operational efficiency of the entire AI ecosystem but also grant NVIDIA a greater say in industry standard-setting and technical roadmap selection, further widening the gap with its competitors.

Mizuho Securities analyst Jordan Klein believes that NVIDIA's investment in component manufacturers is a wise move, as it helps accelerate the resolution of supply shortages for key technologies and products.

Are there hidden risks in Nvidia’s equity investments?

At the same time, NVIDIA’s aggressive investment strategy across the AI supply chain is sparking heated debate and skepticism within the industry regarding the sustainability of its business model.

The core of the criticism centers on the potential risks of "circular investments," where NVIDIA provides funding to customers such as OpenAI and IREN, who then use that capital to purchase NVIDIA’s chips; while this model can boost revenue figures in the short term, it casts doubt on the authenticity of market demand.

Once the AI industry cools, this demand driven by the company’s own capital may rapidly shrink or even fuel an industry bubble, leaving NVIDIA vulnerable to a potential collapse in earnings.

Other analysts have compared this model to the vendor financing seen in earlier tech booms, arguing that it essentially uses capital to pull forward future demand, which poses significant risks in the long run.

Ben Bajarin, an analyst at Creative Strategies, expressed a similar view, pointing out that if the market cycle reverses, investors will begin to scrutinize NVIDIA’s demand growth structure to distinguish how much is organic demand and how much is propped up by its own balance sheet.

Impact on NVIDIA's stock price?

From a revenue perspective, Nvidia's capital injections into large model giants such as OpenAI, Anthropic, and xAI essentially use capital to lock in long-term future demand for computing power; as long as these portfolio companies continue to evolve in the AI race, they will prioritize and extensively adopt Nvidia's technical architecture, a model that significantly enhances the company's revenue predictability over the next three to five years. Capital markets have always favored certainty, and this ecosystem binding effectively reduces the downside risk of the stock price during industry cycle fluctuations, providing more solid support for the share price.

However, Nvidia's equity investment model also harbors the risk of fueling asset bubbles. Some analysts are concerned about "circular investment" issues, where the company uses its own funds to stimulate demand for its own GPUs; should the market cycle reverse and AI commercialization fall short of expectations, the valuations of these portfolio companies could collapse, subsequently impacting Nvidia's balance sheet.

At that point, this $40 billion investment could transform from a tool for stabilizing the share price into a risk factor that triggers volatility, causing the stock's fluctuations to exceed those of its peers. Furthermore, the market's current valuation of Nvidia has already priced in high expectations for its AI ecosystem strategy; if the strategic returns from equity investments fail to meet expectations, a shift in market sentiment could trigger a significant decline in the share price.