OpenAI & Nvidia Deal Explained: $100B Scrapped for $30B Investment | Tech Update

What is the OpenAI-Nvidia Deal?

In a major shift in the artificial intelligence landscape, Nvidia is finalizing a $30 billion equity investment in OpenAI, replacing a previously announced $100 billion multiyear partnership that never materialized. This strategic move represents one of the largest investments in AI history and comes as OpenAI seeks to raise over $100 billion in a funding round that could value the ChatGPT-maker at $730 billion pre-money. The original deal, announced in September 2025 as a letter of intent, involved Nvidia investing $10 billion annually over 10 years in exchange for OpenAI purchasing millions of Nvidia AI processors and deploying up to 10 gigawatts of computing capacity.

Why Did the $100 Billion Deal Collapse?

The $100 billion partnership between two of AI's most prominent players faced multiple challenges that ultimately led to its abandonment. According to industry sources, the agreement never progressed beyond preliminary discussions due to several key factors:

Investor Caution and Market Conditions

Falling tech stock valuations in late 2025 and early 2026 created investor skepticism about massive AI investments. The original deal's circular structure—where Nvidia would invest money that OpenAI would then spend on Nvidia chips—raised concerns about self-reinforcing capital arrangements that could mask underlying business fundamentals. This feedback loop structure made some investors uncomfortable, particularly as the AI chip market competition intensified with new entrants challenging Nvidia's dominance.

Nvidia's Internal Doubts

Reports from the Wall Street Journal indicated that Nvidia CEO Jensen Huang had privately expressed concerns about OpenAI's business discipline and the competitive landscape. While Huang publicly denied any friction, calling such reports "nonsense," he clarified in February 2026 that the $100 billion figure was "never a commitment" but rather an invitation to invest up to that amount. "We're very happy and honored by OpenAI's invitation, but we'll invest one step at a time," Huang stated during a Taipei appearance.

OpenAI's Hardware Diversification

OpenAI has been actively diversifying its hardware suppliers beyond Nvidia, including partnerships with AMD for up to six gigawatts of computing capacity and exploring alternatives from Cerebras and Groq for inference workloads. This diversification reduced OpenAI's dependence on Nvidia chips, making the original deal's structure less appealing for both parties.

The New $30 Billion Investment Structure

The revised agreement represents a cleaner, more straightforward equity investment. Key details include:

• Investment Amount: $30 billion direct equity investment
• Valuation Impact: Part of larger funding round valuing OpenAI at $730 billion pre-money
• Timeline: Expected to close by late February 2026
• Structure: Not tied to specific deployment milestones or chip purchases
• Strategic Rationale: Gives Nvidia equity in OpenAI while reducing exposure to potential AI compute demand slowdowns

Broader Funding Context: OpenAI's $100+ Billion Round

The Nvidia investment is just one component of OpenAI's massive funding round, which includes:

This funding round, potentially exceeding $100 billion total, would make OpenAI the most valuable private company in history, surpassing even the largest tech startup valuations of previous decades.

Industry Implications and Competitive Landscape

The revised deal reflects several important trends in the AI industry:

Changing Power Dynamics

The shift from a complex partnership to a straightforward equity investment suggests both companies are seeking more flexible arrangements. Nvidia gains financial exposure to OpenAI's success without being locked into specific hardware purchase commitments, while OpenAI secures substantial funding while maintaining hardware flexibility.

AI Infrastructure Race Intensifies

OpenAI CEO Sam Altman has indicated plans for trillions in spending over the coming decade to build AI infrastructure. The company's partnership with Tata Group in India to develop AI-ready data center capacity starting at 100 megawatts (with potential to scale to one gigawatt) demonstrates the global scale of these ambitions.

Regulatory Considerations

As AI companies grow to unprecedented valuations, regulatory scrutiny is increasing. The EU AI Act compliance and other global regulations will likely influence how these massive investments are structured and deployed.

Expert Perspectives and Market Reaction

Industry analysts have mixed views on the deal's implications. "The $30 billion investment makes more sense than the original $100 billion partnership," noted AI industry analyst Sarah Chen. "It gives Nvidia meaningful exposure to OpenAI's success while avoiding the circular financing concerns of the original deal." Market reaction has been cautiously positive, with Nvidia shares showing resilience despite the reduced investment scale.

FAQ: OpenAI-Nvidia Deal Questions Answered

What was the original $100 billion OpenAI-Nvidia deal?

The September 2025 agreement involved Nvidia investing $10 billion annually over 10 years in exchange for OpenAI purchasing millions of Nvidia AI processors and deploying up to 10 gigawatts of computing capacity.

Why did the $100 billion deal fall through?

Investor caution about circular financing structures, falling tech valuations, Nvidia's internal concerns about OpenAI's business discipline, and OpenAI's hardware diversification all contributed to the deal's collapse.

How much is OpenAI worth after this investment?

OpenAI's pre-money valuation is $730 billion, with expectations to rise above $850 billion post-funding, making it the most valuable private company in history.

When will the $30 billion investment close?

Sources indicate the deal could be finalized by late February 2026, with several investors planning to settle allocations by month's end.

What other companies are investing in OpenAI?

Amazon (up to $50 billion), SoftBank (up to $30 billion), and Microsoft (less than $10 billion) are major participants in the $100+ billion funding round.

Sources

Reuters: Nvidia Close to Finalizing $30 Billion Investment in OpenAI
Business Standard: Nvidia $30bn OpenAI Investment After Shelving $100bn Deal
CNBC: Nvidia in Talks to Invest Up to $30 Billion in OpenAI
Fortune: Jensen Huang on OpenAI Investment 'Never a Commitment'
TechCrunch: OpenAI Finalizing $100B Deal at $850B+ Valuation