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To: Les H who wrote (47964)	9/24/2025 5:42:25 PM
From: Les H	Read Replies (1) \| Respond to of 48897

Nvidia’s OpenAI Deal Fuels ‘Circular’ Financing Concerns Emily Forgash, Bloomberg Tue, September 23, 2025 Nvidia on Monday said it will invest as much as $100 billion in OpenAI to help the ChatGPT maker support a massive build-out of data centers equipped with Nvidia’s chips — a deal that some analysts say raises questions about whether Nvidia is investing heavily to prop up the market and keep companies spending on its products. “The action will clearly fuel ‘circular’ concerns,” Stacy Rasgon, an analyst with Bernstein Research, wrote in an investor note after the deal was announced. Those concerns have followed Nvidia, to varying degrees, for much of the AI boom. The chipmaker participated in more than 50 different venture investment deals for AI companies in 2024, and is on pace to top that number this year, according to data from PitchBook. Some of these companies, which include AI model makers and cloud providers, then use that capital to buy Nvidia’s expensive graphics processing units. But the size of the OpenAI investment “appears to dwarf all the others,” Rasgon said. The deal will “likely fuel these worries much hotter than what we have seen previously, and (perhaps justifiably) raise concerns over the rationale behind the action,” Rasgon wrote. Nvidia has said the investment in OpenAI will not be used for any “direct purchases” of Nvidia products, Rasgon added. Nvidia and OpenAI said Monday that some details of the agreement are still being hammered out. But OpenAI plans to lease rather than buy the AI processors from Nvidia, according to executives involved in the effort. They also said it’s difficult to predict the rate at which AI chips depreciate. Other large tech companies, including Microsoft Corp. and Amazon.com Inc., have also made strategic investments in top AI startups intended to drive business to their cloud computing offerings. But Nvidia occupies a unique spot in the AI ecosystem by dominating the market for advanced chips that are essential for training cutting-edge AI models. As a result, the company has arguably been the single biggest beneficiary of the AI fervor to date. Nvidia’s deal with OpenAI also comes at an uncertain moment for the industry. More people inside and outside the industry acknowledge the risk of an AI bubble similar to the dot-com bust of 25 years ago. OpenAI Chief Executive Officer Sam Altman has indicated the valuations of some AI startups may not make sense, even as he professes his belief in the long-term potential of AI and the need to invest “trillions” on infrastructure to support it. more... https://finance.yahoo.com/news/nvidia-massive-openai-deal-fuels-202814999.html Vendor financing as with tech/telecom bubble. OpenAI projects a significant cash burn, expecting to spend approximately $115 billion through 2029, an increase of $80 billion from earlier forecasts, to fund infrastructure, data centers, and custom AI chips for its rapidly growing models. This aggressive spending strategy is driven by the pursuit of market dominance in the AI field, with the company aiming to achieve $125 billion in revenue by 2029 to support its massive investments. Key Details: Massive Investment: OpenAI anticipates a total cash burn of $115 billion from 2025 to 2029, requiring substantial funding to support its large-scale AI development and deployment. Funding Sources: This cash will be raised through private markets, with significant capital from major investors like Microsoft, who has provided a substantial infusion into the company. Drivers of Burn: The primary drivers for this increased spending are the escalating costs of developing and maintaining the massive infrastructure needed to train and run advanced AI models, including custom-designed AI chips and huge data centers. Revenue Ambitions: To justify this investment, OpenAI aims for aggressive growth, projecting it will reach $125 billion in revenue by 2029. Investor Concerns: The significant cash burn and high valuation raise concerns about long-term financial sustainability and capital efficiency for investors. Strategic Approach: This is a common strategy in the tech industry, where companies burn cash to acquire talent, infrastructure, and technologies to achieve rapid growth and establish market dominance, with the expectation of profitability and high returns once they achieve a leading position.