Nvidia's investment in OpenAI will be in cash, and most will be used to lease Nvidia chips

Core Insights - Nvidia's investment in OpenAI is projected to reach up to $100 billion, primarily for AI supercomputing facilities, with the first facility expected to be operational in the second half of 2026 [2][6] - OpenAI plans to lease Nvidia's GPUs rather than purchase them upfront, allowing for cost distribution over the GPUs' useful life, which could be up to five years [3][4] - The initial $10 billion from Nvidia will support OpenAI in deploying its first gigawatt of capacity [6] Investment Details - Nvidia's CEO described the deal as "monumental in size," estimating that an AI data center with a gigawatt of capacity costs around $50 billion, with $35 billion allocated for Nvidia's GPUs [4] - The lease arrangement allows OpenAI to manage costs more effectively and potentially secure better terms for future debt financing [9] - OpenAI executives have indicated that equity financing is the most expensive way to fund data centers, and the company is preparing to take on debt for further expansion [8] Operational Implications - The investment will primarily enhance OpenAI's compute capabilities, which are essential for building and training large language models [7] - OpenAI's CFO highlighted the role of partners like Oracle in financing, with Oracle leasing the Abilene facility [10][11] - OpenAI is focused on increasing compute capacity to meet growing demand, emphasizing the need for more resources to support its business model [12][15] Market Context - Nvidia's market cap has surged to $4.3 trillion, driven by GPU sales to OpenAI and other tech giants [13] - OpenAI's valuation is projected at $500 billion, supported by significant investments from Microsoft and others, allowing the company to sustain cash burn while developing AI models [13] - Concerns have been raised about the sustainability of the AI boom, with analysts noting the circular nature of funding arrangements [14]