Jensen Huang invested $2 billion in Elon Musk. It only took NVIDIA one month to build an AI capital empire.

According to Bloomberg, NVIDIA will participate in the new round of financing of xAI, an artificial intelligence company under Elon Musk, with an investment of approximately $2 billion.

The fundraising of xAI in this round far exceeds the initial plan, and the total amount will reach $20 billion.

On Wednesday morning, October 8th, US time, Jensen Huang was interviewed by CNBC and said that the only regret about this deal was that "they didn't give him more money." Jensen Huang said he was very happy to have the opportunity to invest in xAI. "You'd want to be a part of almost everything Elon is doing."

In the past month, NVIDIA has initiated and participated in multiple direct and indirect large - scale investments, all related to the AI field.

On September 22nd, NVIDIA suddenly announced that it would invest up to $100 billion in OpenAI, obtain non - voting shares, and reach a strategic partnership with it. OpenAI will use the investment to rent or purchase NVIDIA GPUs for the construction of its Stargate data center. According to the arrangement, as the chip deployment volume of the Stargate project increases, NVIDIA will gradually pay the investment amount to OpenAI.

A few days before the investment in OpenAI, NVIDIA acquired Intel stocks worth approximately $5 billion at that time. After the news was announced, NVIDIA's stock price rose slightly by 3.5% - which was equivalent to the entire market value of Intel; while Intel's stock price soared by 22%.

It is worth mentioning that NVIDIA's investment arrangement with xAI is almost the same as that with OpenAI:

In NVIDIA's investment arrangement with xAI, the funds raised in this round will be used to establish a new SPV (Special Purpose Vehicle) entity. The SPV will purchase NVIDIA GPUs and then sublease them to xAI.

And in NVIDIA's investment arrangements with companies such as OpenAI and Oracle:

• NVIDIA invests in OpenAI;
• OpenAI signs a cloud - computing order with Oracle;
• Oracle purchases GPUs from NVIDIA to build cloud - computing services;
• NVIDIA and OpenAI rent computing power resources from Oracle

As a result, NVIDIA can generate continuous revenue from hardware sales and cloud services without building and owning its own data centers. Oracle rents computing power resources to companies such as NVIDIA and OpenAI, converting capital expenditures into operating expenditures/revenues. All the companies involved in the transaction have seen a sharp increase in their market value/valuation due to the booming AI.

The AI bubble is far from coming, but the mechanism to inflate it is already in full swing.

How NVIDIA and companies like OpenAI drive the AI money - making machine to keep running | Bloomberg

So far, NVIDIA has invested in a number of leading AI companies, including OpenAI, xAI, and Mistral, as well as hardware/cloud - computing companies such as Intel and CoreWeave through direct shareholding, venture capital investment, etc.

NVIDIA's strategy is to provide computing power services to AI companies - sometimes directly, and sometimes through a cycle structure similar to NVDA - ORCL - OpenAI - and recoup the aforementioned investments.

In this process, each party generally gets what it needs (investment amount, sales revenue, cost amortization, etc.). Moreover, the AI boom is being pushed higher and higher, which is beneficial to multiple parties.

Especially for NVIDIA, due to its extremely high market value and huge disposable funds, it has to achieve reasonable capital allocation through high - value direct investments or indirect capital arrangements in the tens of billions of dollars - which is also understandable.

This article is from the WeChat official account "ifanr" (ID: ifanr), author: Exploring Tomorrow's Trends. It is published by 36Kr with authorization.