Shares of Nvidia dropped $5.18 or 2.82% on Tuesday as it closed the regular trading session at $178.43. The stock gave back more than the half of the 4% it rose on Monday following the company's announcement that it will invest as much as $100 billion in ChatGPT parent OpenAI. This partnership will allow OpenAI to build datacenters powered by 10 gigawatts of "compute capacity" from NVIDIA's AI systems.
Why GPUs are used in AI systems instead of CPUs
NVIDIA's AI systems are built on the company's GPU (Graphics Processing Unit) chips. We've explained it before, but it's worth repeating. GPUs are used as AI accelerators because they excel in parallel processing. That means that with GPUs, multiple cores can be working on the same data at once. A CPU (Central Processing Unit) processes data sequentially. In other words, a CPU handles tasks one at a time.
Is this a big deal for AI?
Yes. This could lead to bigger, better things for AI.
100%
No. I find AI to be worthless.
0%
Gee. I really don't know.
0%
The first phase to come online is expected to take place during the second half of 2026 and it will use the NVIDIA Vera Rubin platform. The latter is NVIDIA's next generation of AI and data center platform and it will replace the Blackwell architecture. The Vera Rubin platform is named for one of the pioneers in astronomy and is built for large rack systems, not for a single chip. That gives the platform the ability to process large amounts of data at one time.
Both companies are excited to partner up to advance AI
Jensen Huang, founder and CEO of NVIDIA, said of the announcement, "NVIDIA and OpenAI have pushed each other for a decade, from the first DGX supercomputer to the breakthrough of ChatGPT. This investment and infrastructure partnership mark the next leap forward — deploying 10 gigawatts to power the next era of intelligence."
NVIDA founder, CEO of NVIDA. | Image credit-NVIDA
Greg Brockman, cofounder and president of OpenAI, also spoke about the news. "We’ve been working closely with NVIDIA since the early days of OpenAI. We’ve utilized their platform to create AI systems that hundreds of millions of people use every day. We’re excited to deploy 10 gigawatts of compute with NVIDIA to push back the frontier of intelligence and scale the benefits of this technology to everyone."
NVIDIA is riding the AI train and is now the most valuable U.S. publicly traded company
OpenAI has over 700 million weekly active users and the partnership with NVIDIA will help the company build AI solutions that will benefit all humanity. The deal is expected to be finalized over the coming weeks.
AI remains the top topic in tech and as a result, NVDIA's shares have emerged as the new bellwether for the sector replacing that little computer company named after a fruit or something. Nvidia has a market value of $4.34 trillion while Apple's shares are valued at $3.78 trillion. In fact, AI has helped Microsoft's stock take the second spot behind NVDIA with a market value of $3.79 trillion placing it just slightly above Apple.
Microsoft has invested $13 billion in OpenAI, but instead of getting a certain percentage ownership in the firm, Microsoft has a profit-sharing agreement with a 49% share of OpenAI Global, LLC. That is the part of the company that is the for-profit unit of OpenAI. Microsoft keeps 49% of this unit's profits every year until a certain cap is reached.
You can't talk about AI and not mention Alphabet, parent company of Google. Gemini has established itself as an AI leader and Alphabet has a market value of $3.06 trillion. Over the last year, the shares have risen 55% which even tops the 47% year-over-year gain achieved by NVDIA's stock. Microsoft's stock has risen 18.7% over the last year, and Apple's shares have tacked on nearly 12% for the year.
This is a serious change in leadership that should not be ignored and with deals like the one between NVIDIA and OpenAI, there is every reason to believe that we are only in the early innings of the AI game.
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