When Nvidia (NVDA) CEO Jensen Huang speaks, investors in the AI sector should listen. The CEO said that the firm might mark its last investments in both OpenAI and Anthropic.
Last year, Nvidia said it would invest “up to $100 billion” in OpenAI. That set a buying frenzy for AI-related names. That valuation bubble deflated, albeit somewhat. NVDA stock traded in a range since then, while weak firms like C3.ai (AI), Bigbear (BBAI), and SoundHound AI (SOUN) traded lower. Quantum computing stocks are nowhere near profitable. Quantum Computing (QUBT) lost 20.6% YTD, while D-Wave Quantum (QBTS) is down by 27.7% YTD.
$30 Billion Invested
Nvidia finalized its OpenAI investment at $30 billion. Huang said that it is likely the last time that the company invests in a “consequential company like this.” OpenAI will likely file for an initial public offering. Markets widely anticipate that the market capitalization will rise to $1 trillion.
Investors are not concerned about OpenAI’s heavy cash burn rates. Despite better competitors like Alphabet (GOOG) having Gemini AI, markets would likely bid OpenAI stock higher. Still, Google may increase profit margins with YouTube and ad revenue from Google search. That would more than offset the capital expenditures for Gemini.
Unfortunately for Anthropic, the White House banned every federal agency from using its AI. This only increases the demand for Anthropic’s Claude. It created wider awareness of Claude’s capabilities compared to OpenAI’s ChatGPT.
