This week it was announced that Nvidia (NVDA) will be investing $100 billion into OpenAI. The partnership will help deploy 10 gigawatts of Nvidia systems. Doug and Lee discuss why the partnership is a perfect pairing.
Doug McIntyre: Lee, it just came out maybe an hour ago that NVIDIA’s putting, a hundred billion dollars into OpenAI. OpenAI’s valuation in the last round was about $380 billion.
Lee Jackson: But they haven’t made a penny.
Doug McIntyre: Now obviously this is sort of self-serving. Because the money is going in primarily for data centers. And guess whose chips you need to use if if you get data centers? To me it says two things. One is, is Nvidia is placing bets all over the place. They’re like some guy who walks into a casino drunk and decides to throw money around. As you know, they’ve got a huge amount of cash, you know, sitting on the balance sheet. But I’m curious, there are tech companies that never use their own cash. The most famous one is Apple. They never buy anything. What do you think of this? What do you think of the idea that you just sort of, I’m gonna take my bets and spread ’em across the industry?
Lee Jackson: Well, it makes sense and it’s interesting that we’re talking about Nvidia and their holdings with that kind of capital, clearly they wanna spread it out because you and I remember when Nvidia was a $2 stock. About 15 years ago, we remember it well and they remember it well and it had they not come up with a gaming, a faster gaming chip in like 2015. It may have been game over for them, but nope. They hung in there. And boy, look at what they own now. And I think doing what they’re doing is kind of what Steve Jobs did. You know, he would go out and acquire companies or invest in other companies to kind of build out the Apple brand and what they were doing and the vendors they were using and things of that nature. And maybe that’s what the top folks in Nvidia think.
Doug McIntyre: I also think it’s a smart hedge. I, I mean, at first the US government wasn’t gonna let Nvidia sell ships to China. Now China does what Nvidia to sell ships to China. And of course they’re claiming two or three of our tech companies suddenly built ships that were just as good as Nvidia’s. It’s the old Chinese playbook. Which is that at some point you learn a lot from the Americans—
Lee Jackson: Then you steal it.
Doug McIntyre: I hate to say this, but Tesla is the most recent example of that is they had number one market share, built a huge factory in Shanghai. All of a sudden there are over 100 EV companies in China. Underwritten to a large extent by the government. Now a bunch of ’em are gonna go outta business, but they’re, because there’re too many. But listen, the EV business in China is now successful, particularly with companies like BYD because they copied Tesla. Nvidia has to be worried about the same thing. So I think side bets are also a smart hedge when it comes to that.
Lee Jackson: Yeah, I think it’s interesting. We saw, and we had talked about the last time we, we did some recording about Broadcom, and they came and blew it out at, like, you and I anticipated they would. Huge, huge revenue gains, you know, EPS above estimates. And it made me think like, uh, oh, you know, there, there’s more than one, uh, player in this game. And there’s, you know, there’s. Broadcom, you know, and Nvidia, and there’s really nobody else that can get in and force their way into that club. So, yeah, I, I think it’s really smart for him to advance, get a big chunk of chat, OpenAI and all that and just widen things out.
Doug McIntyre: Now I think that the Chinese are, because they’ve also said that training, deep seek only costs some, I don’t know, 10 cents when OpenAI’s training, you know, training of full new, uh, generation is probably closer to $20 billion when it comes to the full cycle. So the Chinese are playing a game. The first one is they’re lying about how long it takes them to, to do a full training cycle. And then the other one is, is to say, uh, we, gee, you know, Alibaba just built, you know, a world class chip.
Lee Jackson: Well, we’ll believe it when we see it and it won’t go into any devices in the West. So better make sure they can be used there.
Doug McIntyre: I’m starting to look at Nvidia as a buy again. Not because of their, you know, sort of base business. It’s not a sell for me because it’s China. I mean, I think what they’re doing is they’re a building a portfolio and of investments in companies that’s a very, very smart. It’s a kind of a diversification to businesses that are directly related to theirs.
Lee Jackson: Absolutely. Absolutely they are. And again, you know. He’s been around, their fearless leader has been around long enough to see that tech can change fast. As evidenced by 15 years ago, the stock was $3, you know, and today it would be $182. And that’s, you know, with splits and everything else, and it’s gone up like 3000%. It’s been, you know, dot com sort of huge. But even the best, you know, streaks can run out, you know, it happens in Vegas and you can be on a lucky street, but that’ll run out and you know, they don’t build those big hotels in Vegas ’cause the house loses and eventually that money comes back in some way, shape or form. And he could be concerned about that in the future.
Doug McIntyre: I think he probably is. And it’s smart.
Lee Jackson: Yeah.
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