Why Is Nvidia Stock Down In Premarket?

• Nvidia is reviewing its nonbinding deal with OpenAI, under which it committed to invest $100 billion in the ChatGPT maker and to build and run its AI infrastructure, according to the report.
• Nvidia might instead invest a large sum in OpenAI’s ongoing equity round.
• CEO Jensen Huang said the company is on track for a large investment.

Nvidia Corp.’s shares declined 2% in early premarket trading on Monday amid reports of a change of mood regarding its massive AI infrastructure deal with OpenAI.

The Wall Street Journal reported late Friday, citing sources, that some Nvidia executives have expressed concern over the September agreement between the two companies, under which Nvidia would invest up to $100 billion and set up and run 10 gigawatts for the ChatGPT maker.

However, Huang brushed off the report while speaking to reporters in Taipei, Taiwan, Bloomberg reported on Sunday. Huang said Nvidia planned investment – the quantum of which OpenAI would decide – would be the chipmaker's largest deal to date. He did not provide a definitive update on the September agreement with OpenAI.

Nvidia To Deepen OpenAI Partnership; How, Not Sure

The Journal reported that Nvidia CEO Jensen Huang has privately emphasized that the $100 billion agreement was nonbinding, has criticized what he has described as a lack of discipline in OpenAI’s business approach, and expressed concern about competition.

It also said the deal is reportedly stalled, and Nvidia is instead considering a separate large investment in OpenAI as part of the latter’s $100 billion equity fundraise currently in the works.

AI’s Circular Deals

The developments come as investors have grown increasingly concerned about circular deals in the AI industry. Infrastructure suppliers, cloud providers, and AI companies are increasingly investing in one another while simultaneously transacting billions of dollars in goods and services – ratcheting up concentration risks.

Meanwhile, OpenAI – with cloud contracts with the biggest players like Google, Amazon, Nvidia, and Oracle – has become the centerpiece of Big Tech’s stock momentum. Some investors and analysts have expressed concerns about whether its revenue growth will meet the lofty capital investment targets, including payouts to cloud service providers, that it has set for itself. Those concerns have come to hit at least Oracle.

Retail’s Neutral For Now

On Stocktwits, retail sentiment for NVDA remained ‘neutral’ as of early Monday, changed from the previous day, although several members expressed confidence in the stock regardless of the OpenAI deal outcome. 

“$NVDA I have been buying Nvidia shares for over three years and still buy more Nvidia shares once a month, regardless of the share price,” said one user. Sentiment for OPENAI was ‘bullish.’ 

Nvidia shares gained 2.5% over January, beating the 1.4% rise in the S&P 500 index. For the monthly performance of the entire Magnificent Seven group, see here. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read Next: Microsoft Falls Out Of The $3 Trillion Club After Logging Its Worst Month In Over A Decade – Analysts Are Still Bullish

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