Nvidia Scales Back OpenAI Investment to $30B, Reflecting Strategic Prudence Amid High Valuation Risks

What happened

Nvidia is reportedly nearing a $30 billion investment in OpenAI, a sharp reduction from a previously considered $100 billion plan, according to a Financial Times report. This move occurs as Nvidia's stock trades at $187.90, embedding lofty expectations with a P/E of 46.0 and EV/EBITDA of 53.0, per the DeepValue report, which highlights risks like $30.8 billion in non-cancellable supply commitments and past inventory charges. The scaled-back investment suggests a more cautious capital allocation approach, aligning with concerns over export-control shocks and hyperscaler demand volatility that have previously impacted margins. By targeting OpenAI, Nvidia aims to reinforce its AI ecosystem and secure long-term demand for its Data Center platforms, which drive the majority of revenue. However, this commitment must be evaluated against existing financial obligations and the need for clear guidance on Feb 25, 2026, to justify current valuations.

Implication

The $30 billion investment represents a substantial capital outlay from Nvidia's $60.6 billion liquidity pool, potentially reducing flexibility for buybacks or shock absorption in a volatile market. It underscores Nvidia's push to lock in AI demand through ecosystem partnerships, which could enhance software integration and mitigate customer concentration risks over time. However, the scale-back from $100 billion hints at internal risk assessments or capital constraints, echoing the DeepValue report's warnings on policy-driven inventory charges and demand air pockets. Investors should assess whether this move diverts attention from core execution challenges, such as the Hopper-to-Blackwell transition and export-control management. Ultimately, while reinforcing Nvidia's AI leadership, the investment emphasizes the criticality of the Feb 25 guidance to validate that Data Center growth and margin stability remain on track without new shocks.

Thesis delta

This news does not fundamentally alter the DeepValue report's 'WAIT' rating, as the core thesis remains dependent on Data Center revenue growth and margin confirmation in upcoming guidance. However, it introduces a new capital allocation dimension that requires scrutiny for its impact on Nvidia's financial resilience and strategic focus amidst existing commitments. Investors should view this as a reinforcing but non-decisive factor, maintaining the need for a pullback toward $165 or clear operational signals before considering entry.