Nvidia's shares gain on OpenAI investment

Shares in Nvidia, the world’s largest company, gained 32% in 2025 to 22 September, and 54% over the past 12 months.

The latest boost to Nvidia’s share price came on 22 September as the company revealed it was investing up to $100 billion into OpenAI, the maker of ChatGPT. Nvidia’s shares gained 3.9% on the day the news was announced.

Nvidia (NASDAQ:NVDA) has become one of the most popular stocks in the world thanks to consistently smashing through revenue and earnings expectations over the past few years.

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It has outperformed the other Magnificent Seven stocks during this period, becoming the first company to reach a $4 trillion market cap. Nvidia currently accounts for around 7.3% of the S&P 500 index.

The agreement with OpenAI will see Nvidia deploy at least 10 gigawatts (10 billion watts) of computing resource on which OpenAI will be able to train and run its next generation of artificial intelligence (AI) models. The first wave is expected to come online during the second half of 2026.

Nvidia will, in the process, invest up to $100 billion into OpenAI progressively with each gigawatt that comes online.

“Compute infrastructure will be the basis for the economy of the future, and we will utilise what we’re building with Nvidia to both create new AI breakthroughs and empower people and businesses with them at scale,” said Sam Altman, cofounder and CEO of OpenAI.

In essence, Nvidia will invest into OpenAI, which will in turn use the funding to buy hardware from Nvidia.

“This seemingly reciprocal agreement… is reminiscent of the deals Nvidia has struck with neoclouds including CoreWeave, Lambda, etc. albeit on a much larger scale,” said Matt Bryson, managing director, equity research at Wedbush Securities,

Bank of America analysts estimate that, over time, the partnership could generate $300 billion - $500 billion in revenue for Nvidia, equivalent to a 3-5x return on investment.

Nvidia’s mixed Q2 results

Nvidia’s Q2 FY 2026* results, announced on 27 August, contained reasons for optimism as well as pessimism. While Nvidia beat analysts expectations with revenue of $46.7 billion (a 56% year-over-year increase) and adjusted earnings per share (EPS) of $1.05 (up 54%), data centre revenue of $41.1 billion fell short of expectations (which, depending on the poll, were generally in the $41.2-41.3 billion range).

Data centre is Nvidia’s key division, relating specifically to the computer chips that are powering the artificial intelligence (AI) rollout which has catapulted Nvidia’s stock into its current dominant position in the stock market.

There was also cause for alarm as the company reported no sales to China, the world’s largest semiconductor market outside the US.

“The China market, I’ve estimated to be about $50 billion of opportunity this year,” said Nvidia’s CEO Jensen Huang in the earnings call following results. “You would expect it to grow 50% per year, as the rest of the world’s AI market is growing as well. It is the second largest computing market in the world.”

But between US and Chinese trade policy, Nvidia looks hard-pressed to access this lucrative market. On 17 September, the FT reported that China’s internet regulator, the Cyberspace Administration of China, had prohibited Chinese companies from buying Nvidia chips. This includes the RTX Pro 6000D, Nvidia’s next-generation chip designed to circumvent US export controls on cutting-edge technology to China.

“We can only be in service of a market if the country wants us to be,” Huang told reporters in London, where he was visiting as part of Donald Trump’s state visit. “I’m disappointed with what I see. But they have larger agendas to work out, between China and the US, and I’m understanding of that. We are patient about it.”

Nvidia’s share price fell 2.6% on 17 September as the news broke.

*Nvidia’s financial year ends in January, so the results announced in August 2025 covered the second quarter of its 2026 financial year.

Can Nvidia keep increasing its earnings?

The bull thesis for Nvidia is that AI is going to transform every facet of life and business, and that all of this value created will feed into Nvidia’s bottom line.

“With AI infrastructure investments continuing to grow with the company expecting between $3 trillion to $4 trillion in total AI infrastructure spend by the end of the decade, the chip landscape remains Nvidia’s world with everybody else paying rent,” said Dan Ives, head of global technology research at Wedbush Securities.

But detractors will point out that this thesis falls apart if Nvidia’s profit growth ever underwhelms. “Any chink in [Nvidia’s] profits is likely to be taken very badly by the market,” says Ed Monk, associate director at Fidelity International.

Nvidia's year-over-year revenue growth has slowed from over 250% a year and a half ago to 53.5% in the most recent quarter. This flattening of revenue growth is inevitable as companies grow, but it is part of the reason why markets pay close attention to the numbers that Nvidia puts up relative to expectations.

Monk adds that persistent inflation could be a headache for companies like Nvidia given the investment case relies on profit levels that are extrapolated many years into the future. “As such, they stand to be eroded by any uptick in inflation and rates, which reduces their value in real terms,” he says.

In this context, revenue drivers like the China market take on huge importance for anyone considering buying Nvidia’s shares. If this huge market is closed off to Nvidia over the long term, it could dent the kind of revenue and profit growth that underpins the investment thesis for Nvidia.

Are Nvidia’s shares good value?

Nvidia’s shares currently trade at 52 times trailing earnings, and 41 times its expected earnings over the next 12 months, according to data from Yahoo Finance (as of US market close on 22 September).

This hefty valuation of Nvidia’s shares has given plenty of investors pause for thought over the past two years – even if these metrics are well below the 100-times trailing earnings the stock traded at during 2023.

Bulls will argue that this is a reasonable price to pay for such a successful company, but there is a lot of potential downside should profits underwhelm at any point.

For investors looking for other means of exposure, there are various ways to find value in AI without having to pay the steep valuations that Nvidia commands.