TLDR
- OpenAI is planning gigawatt-scale data centers in India, U.S., and Abu Dhabi as part of Project Stargate’s $500 billion AI infrastructure plan
- Each gigawatt data center requires approximately $35 billion in NVIDIA hardware plus $15 billion in additional components
- NVIDIA reported Q2 revenue of $46.74 billion, up 56%, despite missing $8 billion in potential Chinese sales
- Data center networking revenue nearly doubled to $7.3 billion driven by Spectrum-X Ethernet and InfiniBand products
- Company forecasts AI infrastructure market will reach $3-4 trillion annually by 2030
NVIDIA’s latest earnings revealed a staggering fact that caught Wall Street’s attention. Future gigawatt-scale data centers will cost around $50 billion each to build.
OpenAI appears ready to embrace this massive spending spree. The ChatGPT developer is actively seeking local partners for a data center in India with at least one-gigawatt capacity.
CEO Jensen Huang broke down the economics during the earnings call. A single gigawatt facility demands roughly $35 billion in NVIDIA hardware alone. Additional components add another $15 billion to the tab.
The math gets even more eye-watering when you consider OpenAI’s broader ambitions. The company recently struck a deal with Oracle to develop 4.5 gigawatts of data center capacity across the United States.
They’ve also announced plans for a one-gigawatt cluster in Abu Dhabi. All these projects fall under Project Stargate, OpenAI’s $500 billion infrastructure investment plan.
To put this in perspective, Goldman Sachs estimates total North American data center capacity was just 22 gigawatts at the end of 2024. OpenAI alone could add more than a quarter of that existing capacity.
The company hasn’t revealed funding details for Project Stargate. OpenAI declined to comment when reached early Monday.
Hardware Demand Surges Despite China Restrictions
NVIDIA’s Q2 results showed the AI boom isn’t slowing down. Revenue jumped 56% to $46.74 billion, beating analyst expectations of $46.06 billion.
The growth becomes more impressive considering what didn’t happen. NVIDIA sold zero chips to Chinese customers during the quarter.
The China situation cost them roughly $8 billion in potential revenue. The company took a $4.5 billion inventory write-down on unsold H20 chips designed for that market.
NVIDIA estimates China represents a $50 billion opportunity growing at 50% annually. The company expects to receive export licenses eventually but didn’t factor Chinese sales into current guidance.
Data center revenue climbed 56% to $41.1 billion. That’s up from just $10.3 billion two years ago, showing the rapid acceleration in AI infrastructure spending.
Networking Business Emerges as Hidden Gem
While GPUs grab headlines, NVIDIA’s networking division is quietly becoming a powerhouse. Data center networking revenue nearly doubled to $7.3 billion in Q2.
The growth came from strong demand for Spectrum-X Ethernet, InfiniBand, and NVLink products. These connect AI chips together in massive computing clusters.
NVIDIA’s newest Blackwell chips contributed tens of billions in revenue. The company says Blackwell sets the benchmark for AI inference performance.
Gaming revenue also surged 49% to $4.3 billion. The automotive segment saw 69% growth to $586 million, driven by self-driving car technology.
Cash generation remains robust with $15.4 billion in operating cash flow. The company ended the quarter with $56.8 billion in net cash and marketable securities.
Looking ahead, NVIDIA forecasts Q3 revenue around $54 billion. If China reopens, they could ship $2-5 billion worth of H20 chips in the quarter.
D.A. Davidson analyst Gil Luria raised his outlook for the AI cycle. He now expects sustained demand growth rather than a peak in 2025 as previously anticipated.
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