Nvidia (NVDA 1.06%) has asserted itself as the leader of the artificial intelligence (AI) data revolution, primarily because of the essentialness of its graphic processing units (GPUs).
Nvidia's GPUs are the brains behind the AI applications driving the new tech boom, like ChatGPT and similar generative AI tools, and the company is estimated to have more than a 90% share of the data center GPU market, which is where the AI revolution is happening.
The chip giant's success is the fruit of decades of planning and investment, beginning with its invention of the GPU in 1999 and followed but its CUDA software library that helps make its GPUs easy to use for developers, creating stickiness.
Image source: Nvidia.
Partnerships and alliances
However, since the initial frenzy following the ChatGPT launch, Nvidia has established itself as the kingpin of AI in another way. It's forged a vast network of partnerships and alliances, connecting it to many of the other top players in AI, and reinforcing their dependence on Nvidia.
Those include:
- Arm Holdings: Nvidia owns 1.1 million shares in Arm, and works closely with it on products like the Arm-based Grace Blackwell Superchip.
- CoreWeave: Nvidia owns 24.3 million shares in CoreWeave, one of the two major neocloud, or AI-specific cloud computing platforms. Nvidia helped prop up CoreWeave's IPO, and the two companies are customers of one another.
- Nebius: Nebius is the other major neocloud provider, and Nvidia owns 1.19 million shares of Nebius. Like CoreWeave, Nebius depends heavily on Nvidia hardware.
- Intel: Nvidia surprised the market by agreeing to take a $5 billion stake in Intel back in September, and the two plan to work together on certain AI and personal computing products.
- OpenAI: Also in September, Nvidia announced a deal with OpenAI to invest $100 billion in the start-up over time, while OpenAI said it would deploy at least 10 gigawatts of AI data centers with Nvidia systems over time.
On the heels of the partnerships with Intel and OpenAI, Nvidia is now making a big move with another AI start-up, Anthropic.
What Nvidia is doing with Anthropic
Microsoft and Nvidia announced a blockbuster deal Tuesday morning with Anthropic. Microsoft will invest $5 billion in the start-up, while Nvidia will put in $10 billion, a move that will push Anthropic's valuation up to around $350 billion, about double where it was in its last funding round in September.
Both tech giants will form strategic partnerships with Anthropic as well. Anthropic has committed to purchase $30 billion of compute capacity from Microsoft Azure and to contract additional compute capacity of up to 1 gigawatt, which comes from Nvidia chips, after an initial commitment of 1 gigawatt from Grace Blackwell and the upcoming Vera Rubin systems. The two companies will also work together to optimize Nvidia architecture for Anthropic workloads.
NASDAQ: NVDA
Key Data Points
What the Anthropic deal means for Nvidia
With the investment and partnership with Anthropic, Nvidia is tying itself to the No. 2 generative AI start-up, hedging its bet against OpenAI. Microsoft is doing the same thing, in fact.
Doing so makes sense for Nvidia. By investing in these companies, it ensures it has a stake in them and a seat at the table. The partnerships mean that the start-ups are even more dependent on Nvidia, and it helps give it an edge over the competition, though OpenAI also signed a deal with AMD.
The surge in Anthropic's valuation could add to concerns about a bubble, but the start-up is aiming for $9 billion in run-rate revenue by the end of the year, and nearly tripling run-rate revenue to $26 billion. Based on that forecast, it's understandable why Nvidia and Microsoft would want to own a piece of Anthropic.
For Nvidia, the Anthropic deal might be its most important deal yet -- that title probably goes to the OpenAI deal -- but it's another savvy move that should only further cement its status as the dominant force in AI.
