Shares in Nvidia (NVDA) and other top AI stocks are trading higher on Thursday after the latest price valuation of OpenAI. The ChatGPT developer saw its valuation reach $500B on Thursday, becoming the most valuable startup by surpassing Elon Musk’s SpaceX. A group including existing investors SoftBank and United Arab Emirates-based MGX paid about $6.6 billion to buy shares owned by OpenAI employees, sources told the Wall Street Journal.
OpenAI recently agreed to a deal with Oracle to purchase $300 billion in computing power over roughly five years, people familiar with the deal have said. OpenAI has also committed $10 billion to a chip-building plan with Broadcom, and has received huge funding from chip giant Nvidia and other companies.
How NVDA Stock and OpenAI are Linked
Nvidia’s future growth is linked to OpenAI’s success, particularly its Stargate AI infrastructure project, a key industry investment. “While AI is powered by Nvidia, OpenAI could indeed be the most important company in terms of the trillions in value its vision is supporting right now,” wrote Melius Research analyst Ben Reitzes in a recent research note. “We aren’t very concerned about OpenAI’s ability to raise all this money (into a rate-lowering cycle), we just hope they (and their rivals) get the power they need to keep this going.” The Melius analyst predicts that OpenAI’s platform could generate well over $40 billion in annual advertising revenue, which could result in strong blowback revenue for NVDA.
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Alternatively, the Nvidia/OpenAI deal could raise antitrust concerns, Andre Barlow, an antitrust lawyer with Doyle, Barlow & Mazard, said, according to a Reuters report, indicating the partnership may capture the Department of Justice’s attention. DOJ involvement could steer investors away from NVDA, sending shares lower.
Nvidia NVDA shares are up 6% in the past week and 40% YTD. Several Wall Street experts are optimistic about the stock’s potential, with all price targets above the current $178.19 closing price. Bernstein, with a strong historical price target accuracy of 94.19, suggests a $225 target, indicating a positive outlook on NVDA stock. At the time of writing, NVDA is trading near the top of its 52-week range and above its 200-day simple moving average.