Microsoft-backed (MSFT) AI firm OpenAI and chipmaker Nvidia (NVDA) are exploring a partnership that would allow OpenAI to lease Nvidia’s advanced AI chips instead of purchasing them outright, according to The Information. Indeed, Nvidia appears to be testing new business models in order to serve companies that can’t easily afford its expensive hardware. Unsurprisingly, leasing could lower costs by about 10–15% for OpenAI and reduce the need to raise tens of billions of dollars upfront, while also avoiding the risk of chips becoming outdated too quickly.
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This comes after Nvidia pledged up to $100 billion to support OpenAI’s new data centers, with its chips and networking equipment expected to make up $350–450 billion of the overall $500–600 billion price tag. If finalized, the lease would likely run for around five years, similar to OpenAI’s existing rental agreements with Oracle (ORCL). By renting instead of buying, OpenAI could spread out costs while still getting the cutting-edge hardware it needs to handle the explosive demand for AI models.
The structure of the deal would also protect Nvidia. In fact, one idea being discussed is for Nvidia to set up a separate entity that borrows money to buy the chips, with the chips serving as collateral and OpenAI’s lease payments covering the loan. Additionally, Nvidia is investing $10 billion in OpenAI at a $500 billion valuation. This will give it a small equity stake while helping OpenAI cover the costs of networking and related systems.
What Is a Good Price for NVDA?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 36 Buys, two Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $212.22 per share implies 19.1% upside potential.
