Nvidia has formed a partnership with an OpenAI rival

Back in September, Nvidia Corporation (NVDA) and OpenAI announced a blockbuster strategic partnership, bringing two of the biggest names in artificial intelligence together.

Under the agreement, Nvidia would invest up to $100 billion in the startup, while also deploying at least 10 gigawatts of NVIDIA systems to train and run OpenAI's next generation of models to support its efforts at building superintelligence.

However, while speaking at the Morgan Stanley Technology, Media and Telecom ⁠conference last week, Nvidia founder and CEO Jensen Huang indicated that the company would likely not invest $100 billion in OpenAI anymore.

Instead, Nvidia recently made a $30 billion investment in OpenAI as part of the latter's $110 billion IPO fundraising round, which Huang said at the Morgan Stanley conference would likely be the last time it will "invest in a consequential company like this."

OpenAI's IPO could value the company at $1 trillion, according to Reuters.

And since a trillion-dollar company would not be facing any pressing need for further investments, Nvidia has now turned its attention to one of OpenAI's rivals.

In a joint statement, Nvidia and Thinking Machines Lab announced a a multi-year strategic partnership to deploy at least one gigawatt of next-generation NVIDIA Vera Rubin systems to support Thinking Machines’ frontier model training and platforms that aim to deliver customizable AI at scale.

Mira Murati, the co-founder and CEO of Thinking Machines Labs, is not only the former chief technology officer of OpenAI, she also happened to play a central role in the brief ouster of Sam Altman as chief executive of the company back in 2024

Nvidia will be making a "significant investment" in Thinking Machines as part of the collaboration, although financial details of that investment were not disclosed.

“AI is the most powerful knowledge discovery instrument in human history,” Huang said in a statement “Thinking Machines has brought together a world-class team to advance the frontier of AI. We are thrilled to partner with Thinking Machines to realize their exciting vision for the future of AI.”

The partnership will include "an effort to design training and serving systems for NVIDIA architectures and broaden access to frontier AI and open models for enterprises, research institutions, and the scientific community," the companies said.

“NVIDIA’s technology is the foundation on which the entire field is built,” Murati said in a statement. “This partnership accelerates our capacity to build AI that people can shape and make their own, as it shapes human potential in turn.”

Murati founded Thinking Machines with two former colleagues from OpenAI, Barret Zoph and Fidji Simo. But both Zoph and Simo left the company and returned to OpenAI in January.

Concerns grow over AI's circular investing

Nvidia's investments in companies like OpenAI and Thinking Machines - not to mention its "multiyear, multigenerational strategic partnership" with Meta Platforms (META) - has raised concerns about the circular investing that has been driving the AI boom, which some see as a sign of an AI bubble.

Circular investing occurs when a company like Nvidia or rival Advanced Micro Devices, Inc. (AMD) invest in companies and the companies in turn use the money to buy processors from the chip companies. The concern is that this might not only be driving artificial demand for the AI chips, but that it can compound losses if the companies being invested in fail to deliver on their AI strategy.

This has led to comparisons of the dot-com boom in the 1990s, when circular dealmaking also helped drive the growth in the tech space.

But JPMorgan global chief strategist Stephanie Aliaga noted some key differences between investments being made in the AI space from those made in the 1990s tech space, including the fact that many hyperscalers have robust balance sheets. She also said that while "early internet firms built first and monetized later, AI is monetizing as it builds."

“Hyperscalers are already seeing returns through increased cloud demand and productivity gains in coding, advertising and enterprise tools,” Aliaga said.

Huang himself pushed back on the concerns over circular financing after Nvidia invested $2 billion in neocloud company CoreWeave (CRWV) in January.

“These are generational companies — the investments that we make is confidence in them,” Huang said. “But it’s a small percentage of the amount of money that they ultimately have to go raise, and so the idea that it is circular is — it’s ridiculous.”