Many predict that the artificial intelligence boom will dramatically change the way people live and work, and the scale and pace of recent AI deals appears to reflect this. At the heart of this is a small number of companies increasingly collaborating with each other to build and finance the necessary infrastructure.
OpenAI, the company behind ChatGPT, alone has attracted about $1 trillion in transactions this year, according to a report in the Financial Times. OpenAI confirmed in September that it would pay Oracle $300 billion over five years for computer infrastructure. The deal is part of a $500 billion data center construction project called Stargate, which also includes Japan’s SoftBank Group. OpenAI also signed $22 billion in contracts with the following companies: core weave For data center use, Nvidia Graphics processing unit. Most recently, OpenAI announced a partnership with Broadcom to develop and deploy racks of chips designed by AI startups. The transaction amount is not disclosed. OpenAI was able to make this buyout thanks to a $100 billion investment from Nvidia, but the bulk of that money will likely be used to lease Nvidia’s GPUs. Microsoft has also invested about $14 billion in OpenAI since 2019.
Nvidia is weaving a similar tangled web of AI deals. Nvidia agreed in September to pay up to $6.3 billion for CoreWeave’s unsold cloud computing capacity by 2032. CoreWeave gets most of its GPUs from Nvidia and rents them to customers, but NVIDIA is also an investor in the AI cloud infrastructure company. Meanwhile, Oracle purchased about $40 billion worth of Nvidia chips to build OpenAI data centers as part of its Stargate project. SoftBank owns a $3 billion stake in Nvidia.
Some experts worry that these inflated valuations of AI companies are “in a bubble.” A recent report by Bain & Company found that AI companies will need $2 trillion in annual revenue to fund the infrastructure needed to meet the projected demand for AI by 2030. This amounts to an $800 billion shortfall.
But AI leaders are pushing back on concerns, saying this is what is needed to make AI a reality.
“The biggest tech companies in the world are buying this infrastructure because there’s a demand for it,” Coreweave CEO Mike Intrater told Mad Money on October 8. “There’s nothing cyclical about it. This is a foundational infrastructure build out, and when there’s such a large investment in infrastructure, it’s not unusual for people to partner up to provide that infrastructure to consumers. It’s happened in other companies as well.” That’s what’s happening in this market. ”
Watch this video for a visual representation of this complex web of AI trading.
