Nvidia’s story is getting "messy" amid string of investments, Yardeni says

Investing.com - The narrative around Nvidia is getting "messy" as the artificial intelligence darling plugs massive investments into smaller companies which are, at the same time, its customers, according to analysts at Yardeni Research.

In a note, the analysts flagged that, although Nvidia has the cash on hand to fund these investments, the firm’s fortunes are now "closely tied to those" smaller players.

"As long as companies [...] can continue to raise billions of dollars from Nvidia and others to build data centers, Nvidia’s chips should stay in demand," they wrote.

"But the day that stops, watch out."

Earlier this week, Nvidia announced that it would invest up to $100 billion in OpenAI in order to help the ChatGPT-maker build out data centers that are likely to utilitize Nvidia’s AI-optimized chips.

It was the latest in a string of investments the California-based semiconductor giant has pledged in recent days. Last week, the firm said it would take a $5 billion stake in ailing U.S. chipmaker Intel, with both groups also planning to jointly develop personal computer and data center processors. Nvidia has said it will plug roughly $2.7 billion in the U.K.’s AI start-up ecosystem as well, and invested $500 million in British data center name Nscale.

Nvidia previously invested $100 million into CoreWeave in 2023, then purchased a further $250 million in stock when the outlook for the AI-enhanced cloud provider’s initial public offering was murky last March. Media reports have said Nvidia has agreed to buy any unsold capacity in CoreWeave’s server -- which are filled with Nvidia’s own chips -- through April 2032.

Analysts at Vital Knowledge highlighted what they described as the "circular nature" of these financing arrangements, which would see Nvidia in effect supporting its own clients. They added that the agreements have cast a slight pall over soaring enthusiasm around AI in the last few days.

"[I]f AI is such an unstoppable phenomenon, why is Nvidia financially backstopping two of its biggest customers, OpenAI and CoreWeave?" they wrote.

Still, Nvidia’s shares do not seem to suggest investor concern around the investments, the Yardeni analysts argued, noting that the stock touched a 52-week high on Monday. So far this year, the AI bellwether has climbed by more than 27%.