Not just selling chips! NVIDIA Corporation (NVDA.US) is transforming into the most powerful AI investor. It has already invested in nearly 60 companies this year.

NVIDIA Corporation (NVDA.US) may not be a traditional venture capital institution, but it has quietly become one of the most influential participants in the venture capital field. The world's highest market value company announced in September its plan to invest $1 billion in OpenAI - making it the largest investment in a startup company in history. However, this is just a part of NVIDIA Corporation's expanding investment layout in private artificial intelligence (AI) companies globally. PitchBook data shows that as of mid-October, this chip manufacturer has already invested in 59 AI startup companies this year, with at least 10 companies invested in just the past two months. This number has surpassed its record of 55 investments for the entire year of 2024, showing a significant increase from the 12 investments in 2022. NVIDIA Corporation CEO Jensen Huang stated that the company's strategy is to support a broader AI ecosystem. Currently, NVIDIA Corporation is the biggest beneficiary in the AI infrastructure spending boom. Analysts point out that to maintain this growth momentum, it is necessary to drive the application of AI technology in a wider range of economic sectors, and the new application scenarios developed by startups will be a key driver. By supporting AI startups, NVIDIA Corporation is following the usual path of corporate venture capital departments - but at a faster pace and with higher stakes. Bernstein analyst Stacy Rasgon said, "Clearly, with the expansion of the AI ecosystem, NVIDIA Corporation hopes that all construction will be based on its technological architecture. Once a technological moat is established, competitors will find it difficult to challenge its position." In addition to the major investment in OpenAI, NVIDIA Corporation also supports AI companies of various sizes. These include Reflection AI, which develops autonomous programming agents, Reka AI, which develops video analysis models, and Perplexity AI, an AI search engine company aimed at challenging Alphabet Inc. Class C (GOOGL.US)'s position. For these startups, NVIDIA Corporation's investment not only brings capital support but also provides a channel to access its management and scarce computing power resources. Aravind Srinivas, CEO of Perplexity, revealed in an interview last year that he had requested technical resources from NVIDIA Corporation executives to optimize product demos, and Jensen Huang immediately instructed the team to provide support, which was resolved within half an hour. "I have made similar requests to CEOs of other companies before, usually these requests were forwarded to department heads or vice presidents first, and then they would arrange another meeting to further understand the specific use case. But with Jensen Huang, things can be finalized quickly," Srinivas said. Some startups use the funds to purchase NVIDIA Corporation's high-performance chips, which cost tens of thousands of dollars each and are essential for training cutting-edge AI models. While each company's computing power needs vary, most plan to stockpile thousands of processors. Although NVIDIA Corporation does not require the invested companies to purchase its products, these chips often become one of the main expenditure items for startups. For example, Reka completed a $110 million financing this year with the support of NVIDIA Corporation. CEO Dani Yogatama said that part of the funds will be used to enhance computing power. The company has also joined NVIDIA Corporation's "Inception" program, which empowers AI startups through a technical platform and promises deep collaboration with chip manufacturers. Yogatama pointed out that having access to NVIDIA Corporation's engineers and distribution network is significant for Reka to expand its customer base and improve product quality. Yogatama said, "Companies like NVIDIA Corporation have broad influence globally and can help us promote our technology. For small companies like us, even if we develop the most advanced technology, it is of no value if no one uses it." Undoubtedly, NVIDIA Corporation has established a unique position in the ecosystem: its dominant position in the high-end chip market has propelled the company's market value to $4.9 trillion. Surging sales have brought abundant free cash flow. Morningstar analyst Brian Colello pointed out, "NVIDIA Corporation's cash reserves are so large that they don't know how to manage it." Colello also said, "Given that many transactions may not pass the review of the Federal Trade Commission (FTC), it is more reasonable for the company to make smaller investments at this stage." Investing in startups ultimately aims to help NVIDIA Corporation diversify its customer base. Currently, tech giants still account for a high proportion of the company's customer base. The top five customers contribute nearly 50% of revenue: Microsoft Corporation (MSFT.US), Meta (META.US), Amazon.com, Inc. (AMZN.US), and Alphabet Inc. Class C (GOOGL.US) are the top four cloud service providers - these companies' data centers heavily utilize NVIDIA Corporation chips; and Super Micro Computer, Inc. (SMCI.US) - whose servers are already equipped with NVIDIA Corporation chips before entering data centers. OpenAI, which has promised to invest billions in building AI infrastructure despite not yet being profitable, is also considered one of its main customers. Meanwhile, many large companies are working to reduce their dependence on NVIDIA Corporation chips. On October 6, OpenAI reached a partnership with NVIDIA Corporation's competitor AMD (AMD.US) to deploy AMD chips worth hundreds of billions of dollars. The following week, OpenAI agreed to purchase customized chips from Broadcom Inc. (AVGO.US) to provide computing power for ChatGPT. Alphabet Inc. Class C also collaborated with Broadcom Inc. to develop in-house chips to help reduce costs for its Gemini model. While some analysts are concerned about the interdependence in the AI ecosystem, in the long run, NVIDIA Corporation's continuous investments in AI companies demonstrate its optimistic outlook on the industry's prospects. The recent wave of transactions and collaborations involving NVIDIA Corporation and a few core AI players has heightened market concerns - whether the increasingly complex and intertwined business network is artificially supporting the trillion-dollar AI boom. But Jensen Huang believes that the industry is on the eve of an explosion. "We have made several outstanding investments," the CEO said in an interview this month, "If there is any regret, it is probably that we should have invested more at the beginning."