NVIDIA (NASDAQ: NVDA) is a critical cog in the ongoing data center investment cycle. Most AI hyperscalers use Nvidia’s GPUs to train and run artificial intelligence (AI) in large data centers.
Recently, the company announced a new investment of US$2 billion core weavingspecializing in building artificial intelligence factories and professional data centers. It then leases computing power to artificial intelligence companies, including OpenAI, meta platformand others.
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What does this new investment mean for Nvidia stock?
Nvidia’s investment increases its stake in CoreWeave to approximately 6.6%. CoreWeave’s data centers are designed and built specifically for artificial intelligence. This is like a shortcut for AI hyperscale enterprises, who can access computing resources faster by renting from CoreWeave rather than building their own data centers from scratch.
Since CoreWeave uses Nvidia GPUs in its data centers, any business the company does with AI hyperscale processors also means it’s doing business with Nvidia. In other words, it helps protect Nvidia’s AI market share.
The ongoing data center boom feels like a technological arms race. Significant investment is driving CoreWeave’s significant growth. Analysts expect CoreWeave’s revenue to surge from $4.3 billion in the past 12 months to $12 billion this fiscal year and $19.5 billion the following year.
The other layer is Nvidia’s upcoming Rubin chip. CoreWeave prides itself on its data center engineering, which is built with future hardware in mind. Nvidia recently began full production of its Rubin AI chip architecture, and as CoreWeave develops, it could help Nvidia launch Rubin and future chips more efficiently.
It seems like the generational investment boom is still in its very early stages. Artificial intelligence is still getting smarter, and real-world adoption is just beginning. Both trends translate into more power and chips to make it all work.
That’s why experts believe global data center spending could reach trillions of dollars in the next few years. Despite its explosive nature, the era of artificial intelligence may still be in its early stages. The U.S. government only recently launched the Genesis Mission to build artificial intelligence.
All things considered, calling this a game-changer for Nvidia is a stretch. Both CoreWeave and Nvidia’s stakes in the company are relatively small compared to Nvidia as a whole. Nvidia’s core business remains selling GPU chips directly to hyperscalers, which already get some capacity through CoreWeave but are still pouring billions into their own data centers.
