TLDR
- Nvidia is investing up to $2 billion in equity as part of xAI’s $20 billion funding round
- CEO Jensen Huang confirmed demand is “really, really high” for Blackwell GPUs
- Nvidia agreed to deploy at least 10 gigawatts of AI data centers for OpenAI in a $100 billion partnership
- The company reported Q2 earnings of $1.05 per share on revenue of $46.74 billion, beating estimates
- Nvidia shares rose 2.20% to close at $189.11 on Wednesday
Nvidia shares climbed Wednesday after CEO Jensen Huang confirmed the company’s participation in Elon Musk’s xAI venture. The stock closed at $189.11, up 2.20% for the session.
The AI chipmaker is investing up to $2 billion in equity as part of xAI’s $20 billion fundraising round. The financing structure includes approximately $7.5 billion in equity and up to $12.5 billion in debt.
The arrangement enables xAI to purchase Nvidia’s advanced GPUs for its Colossus 2 data center in Memphis, Tennessee. The deal uses a special purpose vehicle that will buy Nvidia’s hardware and lease it to xAI for five years.
This leasing structure allows investors to secure returns through chip rentals while keeping the debt collateralized by the GPUs. Valor Capital leads the equity round, while Apollo Global Management and Diameter Capital Partners oversee the debt portion.
Huang told CNBC that demand is “really, really high” for Nvidia’s Blackwell graphics processing units. The CEO’s comments came as the company faces competition from AMD, which announced its own partnership with OpenAI on Monday.
Nvidia Expands OpenAI Partnership
Under the Nvidia-OpenAI partnership announced in September, OpenAI will deploy at least 10 gigawatts of AI data centers running Nvidia processors. AMD will power 6 gigawatts of OpenAI’s infrastructure using multiple generations of its graphic processing units.
Evercore ISI raised its Nvidia sales estimates by $5.5 billion in the second half of 2026. The firm boosted its price target to 225 from 214.
Bank of America analysts see the OpenAI investment returning three to five times the initial investment. However, Stacy Rasgon at Bernstein raised concerns about Nvidia investing in startups that then buy its graphic processing units.
The Nvidia-OpenAI deal could raise antitrust concerns, according to Andre Barlow, an antitrust lawyer with Doyle, Barlow & Mazard. The partnership may capture the Department of Justice’s attention.
xAI faces monthly operating costs approaching $1 billion as it scales AI infrastructure. The company raised approximately $10 billion earlier this year through combined debt and equity offerings.
China Market Challenges
Huang said during the CNBC interview that the U.S. is “not far ahead” of China in AI technology despite better AI models. He noted China was ahead in energy, open-source AI models and advances in the AI application layer.
Nvidia shares fell in mid-September after The Financial Times reported China’s Cyberspace Administration ordered major tech companies to stop buying AI chips made by Nvidia. China’s State Administration for Market Regulation is investigating whether Nvidia breached antitrust rules by acquiring Mellanox Technology in 2020.
The company struck a deal in August that secured a license to sell its H20 AI chips in China. In exchange, Nvidia will give 15% of its revenue from chip sales in China to the U.S. government.
Nvidia placed an order for 300,000 H20 chips with Taiwan Semiconductor, adding to an existing inventory of 600,000 to 700,000 chips. In 2024, Nvidia sold around 1 million H20 chips, according to research firm SemiAnalysis.
The company reported fiscal second-quarter earnings of $1.05 per share, topping estimates of $1.01 per share. Sales of $46.74 billion beat views of $46.05 billion.
Nvidia reported zero sales from its China H20 chip and did not include H20 sales to China in its fiscal third-quarter revenue outlook of $54 billion. Wall Street was expecting $53.43 billion.
The company announced a $60 billion stock buyback. Nvidia became the first company to hit a $4 trillion market cap in July, overtaking Apple and Microsoft.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
