Why did AI infrastructure partnership push Nvidia’s shares down?
Nvidia remains the world’s largest company by market capitalisation but its stock has been volatile ahead of its latest move to shore up AI infrastructure spending.
Shares in Nvidia fell in the week commencing 10 August following an announcement that it was partnering with some of the world’s largest finance companies to mobilise $500 billion in third-party capital to build out artificial intelligence infrastructure.
Nvidia (NASDAQ:NVDA) is the world’s largest artificial intelligence (AI) infrastructure business, and for most of the last year, it has been the largest company by market capitalisation (market cap).
While Nvidia holds that position at time of writing, it was briefly surpassed by fellow Magnificent 7 stock Apple in late July. Nvidia’s market cap has fluctuated substantially this year, dipping to little above $4 trillion in March, and as high as $5.7 trillion in May.
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That volatility has been driven by macroeconomic factors, particularly the impact of the war in Iran, but also by a degree of uncertainty within the markets over the sustainability of current AI valuations and expenditures.
Nvidia’s announcement that it was partnering with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR – some of the biggest asset managers and investment banks in the world – to facilitate $500 billion in AI infrastructure investment was met with scepticism by the market. Nvidia’s share price fell 2.9% on 10 August, following the announcement.
“Nvidia’s plan to help mobilise up to $500 billion for new AI infrastructure is a powerful sign of its ambition, but it will also sharpen concerns about circular financing,” said Matt Britzman, senior equity analyst at wealth manager Hargreaves Lansdown.
How will Nvidia’s AI financing deal work?
Analysts have picked over the workings of Nvidia’s AI infrastructure partnership, which effectively creates an investment fund that can invest on new AI infrastructure projects such as new data centre builds.
“We are bringing the world’s leading long-term capital providers together to independently underwrite AI infrastructure,” said Jensen Huang, founder and CEO of Nvidia. “These financing platforms will help customers access scarce compute at scale.”
Nvidia’s products underpin most of the AI industry, so these projects will inevitably translate into revenue for the company.
“Nvidia expects to play a relatively passive role, with independent investors assessing each opportunity on its own merits and providing most of the capital,” said Britzman. “That should offer some reassurance that projects will face outside scrutiny rather than being built simply to create more demand for Nvidia’s products.”
Nvidia’s stock wobbles on AI profitability concerns
Markets didn’t appear convinced, and sold off the stock on 10 August. Concerns have been raised throughout the AI boom that the financial benefits appear to be concentrated in the infrastructure producers, especially Nvidia.
For current levels of demand to be sustainable, the benefits of AI spending need to be demonstrably spread beyond the companies building the hardware.
“AI spending concerns rumble on,” said Richard Hunter, head of markets at investment platform Interactive Investor (ii). “The unprecedented levels of capital investment have seen companies tap both the debt and equity markets for capital, while in some cases running down their own cash piles to maintain the required funding.”
Hunter added that part of the reason that optimism over AI has endured is that spending, particularly on infrastructure, is continuing in spite of rising inflation concerns. Nvidia’s financing deal underscores this.
Nonetheless, markets are increasingly wondering when ‘hyperscalers’ will be rewarded for their soaring AI spend.
For the boom to appear truly sustainable, AI’s end users need to see tangible value from the technology, which remains expensive to develop and produce.
Are Nvidia shares good value?
Nvidia’s shares currently trade at around 25 times its expected earnings, as of 11 August. That is a little higher than the average for the S&P 500 index (21 times), but Nvidia is relatively moderately-valued on this metric compared to certain points in its recent history.
Despite trading at close to the highest face value they’ve ever been, Nvidia’s shares have a much more reasonable trailing price/earnings ratio now (approximately 33 times) than they did in July 2025, when the shares traded at around 50 times expected earnings.
With a stock like Nvidia, given how much focus and attention it receives, there is always the risk of volatility, so you will need to decide how much risk you are willing to take and where it fits in your investment strategy before buying Nvidia stock.
