Whalesbook
Nvidia plans to invest more than $40 billion in AI equity by early 2026, a move set to reshape its role in the artificial intelligence world. The chip giant is dedicating $30 billion to OpenAI, along with significant investments in glassmaker Corning and data center operator IREN. While this bold financial strategy aims to strengthen Nvidia's position in the fast-changing AI sector, it has sparked questions about whether these large equity stakes are sustainable and strategically sound.
Building an Advantage
Nvidia's main goal is to build a strong competitive advantage. By investing directly in key AI companies and infrastructure providers, Nvidia aims to guarantee future sales of its high-performance chips. The $30 billion investment in OpenAI, for example, secures a major customer, potentially locking in chip orders and ensuring close collaboration on AI advancements. Wedbush Securities analyst Matthew Bryson acknowledges the 'circular investment' aspect but believes successful execution could create a powerful competitive edge.
The 'Circular Deal' Criticism
Critics argue that Nvidia's investments, including up to $3.2 billion in Corning and $2.1 billion in IREN, create a closed financial loop. This criticism follows concerns when a $100 billion partnership with OpenAI was adjusted to the $30 billion equity investment in early 2026. It suggests Nvidia may have revised its expectations for AI market growth and profits. Nvidia's stock has risen sharply, reaching a market value near $5.2 trillion with a P/E ratio of about 43.92 as of May 8, 2026. However, this valuation is in a highly competitive and costly market.
Competitors and Market Risks
Nvidia's competitors are not standing still. Alphabet, Microsoft, and Meta plan to spend hundreds of billions on AI infrastructure in 2026, with Google alone aiming for $175-185 billion in capital spending. The overall chip market is growing rapidly, expected to reach over $975 billion in revenue by 2026 due to AI demand. But this growth carries risks. Analysts warn of potential problems and market downturns, even with strong growth drivers. Rivals such as AMD, Intel, and Broadcom are increasing their focus on AI chips, aiming to challenge Nvidia's 85% market share. Intel, for example, will launch a new AI-GPU line in 2026 to compete with Nvidia's hardware.
Examining Investment Targets
The financial health and market position of Nvidia's investment targets also require examination. OpenAI, valued at an estimated $730-850 billion, is facing regulatory review. Corning, which supplies networking products for AI infrastructure, reported strong first-quarter 2026 results with sales of $4.35 billion and earnings per share of $0.70. Demand for its AI products drove this performance, and it has a partnership with Nvidia to boost U.S. manufacturing. In contrast, data center operator IREN reported a net loss of $247.8 million in its third quarter of fiscal 2026, even as its AI Cloud services revenue climbed to $33.6 million. Analysts have mixed views on IREN's stock.
Risks and Market Correction
Beyond the 'circular deal' concerns, Nvidia faces execution risks managing its large investment portfolio. The immense capital invested, combined with fierce competition and the natural ups and downs of the chip market, creates major challenges. A market downturn for AI companies, possibly due to economic worries or if growth fails to meet high expectations, could reveal weaknesses in these linked investments. Increased government oversight on AI market dominance also presents a real risk.
Analyst Outlook
Most analysts are still positive about Nvidia's strategy. Wedbush's Matt Bryson, for example, keeps an 'outperform' rating and a $300 price target for Nvidia stock, pointing to strong underlying demand. However, the success of this broad investment strategy long-term depends on Nvidia's ability to handle competition, regulatory issues, and the unpredictable AI market. Ultimately, these major investments must lead to lasting market leadership for the strategy to prove successful.