Nvidia’s AI Startup Investments: 3 Key Players to Watch

Nvidia’s recent flurry of investments in artificial intelligence startups has sparked both significant excitement and considerable skepticism on Wall Street. The company’s partnership with OpenAI, involving a massive $100 billion investment, represents the most prominent example of what some critics are calling “circular” financing arrangements. This pattern of deals has drawn comparisons to the dynamics that fueled the dot-com boom and its eventual bust nearly 25 years ago, raising questions about whether the current AI market is experiencing similar bubble conditions.

However, a closer examination of Nvidia’s fundamentals suggests these bubble concerns may be overblown. At the time of writing, Nvidia shares trade at just shy of 30 times forward price-to-earnings (P/E), a multiple that doesn’t scream bubble territory, especially when considering the company’s real, profitable growth. The GPU maker continues to grow at more than 50% annually despite being a nearly $4.4 billion behemoth, an unprecedented achievement for a company of its size that’s translating into substantial real cash flows.

Federal Reserve Chairman Jerome Powell’s characterization of current market conditions as “fairly highly valued” rather than bubbly appears more appropriate. The presence of healthy skepticism among investors, combined with Nvidia’s demonstrated ability to generate serious profits that it can reinvest in AI innovators, suggests a more sustainable foundation than the dot-com era’s speculative frenzy.

Nvidia’s investment strategy represents a calculated deployment of the substantial cash generated from its core AI chip business. As CEO Jensen Huang told CNBC, his “only regret” is that he didn’t invest more in companies like Elon Musk’s xAI and other promising AI firms. This sentiment underscores the company’s conviction in the long-term potential of these investments and reflects a strategic vision that extends beyond immediate returns.

The magnitude of Nvidia’s recent deals has grown significantly as its cash pile expands, enabling larger bets on AI innovators. The company is strategically spreading its investments across multiple promising AI companies, increasing its odds of hitting winners while broadening its exposure to the AI boom. This approach represents a smart deployment of excess capital for a company positioned at the center of the AI revolution.

Nvidia’s ability to continue this pace of dealmaking depends on sustained demand for its AI chips. Unless this demand falls off a cliff—which would trigger a painful market correction—the company appears well-positioned to maintain its investment momentum. The current environment allows Nvidia to leverage its market position and financial strength to secure stakes in companies that could deliver substantial returns in the coming years.

OpenAI stands as Nvidia’s most significant investment, with the chipmaker committing $100 billion to the ChatGPT creator. This massive bet reflects Nvidia’s confidence in OpenAI’s position at the forefront of generative AI development. The partnership strengthens the symbiotic relationship between hardware provider and software innovator, creating a powerful alliance in the competitive AI landscape.

Elon Musk’s xAI represents another major Nvidia-backed venture, with the chipmaker poised to invest up to $2 billion as part of the company’s latest funding round. xAI’s Grok AI model complements Nvidia’s broader AI ecosystem strategy, providing exposure to Musk’s vision for artificial intelligence. This investment demonstrates Nvidia’s commitment to backing multiple approaches to AI development rather than putting all its chips on a single contender.

France’s Mistral AI completes the trio of notable Nvidia-backed private firms, though the exact size of Nvidia’s stake remains undisclosed. Mistral’s Le Chat AI model represents the European contender in the global AI race, giving Nvidia geographic diversification in its AI portfolio. By maintaining stakes in the companies behind Grok, ChatGPT, and Le Chat, Nvidia positions itself to benefit regardless of which AI models ultimately dominate the market.

For retail investors who cannot directly access these private AI innovators, Nvidia stock represents a compelling proxy investment. The company’s aggressive deployment of capital into promising AI startups that aren’t yet available to the general public provides indirect exposure to the most exciting developments in artificial intelligence. This dynamic—where many leading AI innovators remain private—suggests the market may not yet be in full bubble territory.

The relationships between Nvidia and large language model makers like OpenAI, xAI, and Mistral AI are likely to deepen as the AI ecosystem evolves. Nvidia’s strategy of investing heavily in companies that are also major customers creates a virtuous cycle that could accelerate AI development while generating returns for the chipmaker. As these private companies eventually enter public markets, the true test of Nvidia’s investment acumen will become apparent.

While concerns about circular financing warrant monitoring, Nvidia’s current trajectory suggests these investments are strategic rather than speculative. The company’s strong fundamentals, combined with its unique position at the center of the AI revolution, provide a solid foundation for its ambitious investment strategy. As Jensen Huang and company continue to deploy their growing cash reserves, the AI landscape appears poised for further transformation, with Nvidia positioned as both enabler and beneficiary.