OpenAI just gave Nvidia investors 40 billion reasons to cheer.
A number of companies have made commitments to invest in domestic infrastructure over the next several years. Chief among these initiatives is a joint venture among Oracle, SoftBank, and OpenAI. Known as Stargate, this consortium of technology leaders plans to invest $500 billion into artificial intelligence (AI) infrastructure in the U.S.
Just last week, investors finally got an update on how Stargate is progressing. In perhaps a shock to absolutely no one, semiconductor powerhouse Nvidia (NVDA -2.85%) is involved with a new data center for OpenAI.
Let’s dig into this deal and assess why it could be a game changer for Nvidia.
How are Nvidia and OpenAI working together?
As a refresher, OpenAI burst onto the AI scene a few years ago following a multibillion-dollar investment from Microsoft. While OpenAI’s services, chief among them ChatGPT, have become heavily integrated throughout Microsoft’s ecosystem, both companies have been seeking opportunities to branch out over the last year or so.
For OpenAI, the company has reached a point whereby striking partnerships with other technology companies is essential — hence the creation of Stargate.
The reason for this is that as demand for ChatGPT grows, so does the need for compute power (i.e., more data center infrastructure). However, Microsoft simply cannot be the sole bridge to finance OpenAI’s needs.
Per recent reports, Oracle is planning to purchase an estimated 400,000 graphics processing units (GPU) from Nvidia for OpenAI’s new data center in Texas. Of note, the GPUs are Nvidia’s new Blackwell architecture and could cost Oracle up to $40 billion.
Oracle will subsequently be leasing these chips to OpenAI as part of the deal structure, adding even more tailwinds to its fast-growing infrastructure-as-a-service (IaaS) division.
Image source: Getty Images.
Why is this deal important?
I see two primary reasons why this deal is a game changer for Nvidia.
First, global management consulting firm McKinsey & Company recently published a report in which it estimates nearly $7 trillion will be spent on AI infrastructure over the next five years. Within this grand total, McKinsey believes that hardware providers will be the biggest beneficiaries of rising AI capital expenditure (capex).
Even though Stargate is still in its infancy, there are signs that hardware suppliers such as Nvidia are already benefiting from increased AI infrastructure budgets. Reports suggest that OpenAI is considering building more data centers beyond Texas. Given Nvidia’s selection to lead this initial buildout, I’m optimistic the company could continue winning more contracts from the Stargate project — hence, this could be the beginning of a long-term relationship between OpenAI and Nvidia.
On top of that, it was reported earlier this year that OpenAI was collaborating with Taiwan Semiconductor Manufacturing to develop its own custom chipsets. While OpenAI may indeed eventually pursue custom silicon, it appears for now that the company’s compute power relies heavily on data centers outfitted with Nvidia’s GPUs.
To me, this signals that demand for Blackwell continues to remain robust. Moreover, Nvidia’s selection as a primary chip supplier for one of Stargate’s initial projects underscores just how critical the company’s hardware is for ongoing AI development.
Should you buy Nvidia stock right now?
For the first time in almost three years, Nvidia stock has actually taken a breather — and a prolonged one at that.
NVDA PE Ratio (Forward) data by YCharts
Investors have been selling Nvidia stock throughout most of 2025, thanks in large part to uncertainty around new tariff policies and how they may impact Nvidia’s ability to conduct business in China.
Nevertheless, the company’s forward price to earnings (P/E) multiple of 32.6 shows some clear valuation compression in the red-hot chip stock. I see the deal with OpenAI as a potential proxy for what’s to come for Nvidia as Stargate and other AI infrastructure deals come to fruition. To me, the company’s long-run prospects look as strong as ever — despite some headwinds in key Asian markets for now.
Investors with a long-run time horizon may want to consider scooping up shares of Nvidia right now, as the stock could witness a sharp rebound if it continues to win over more high-profile deals with AI’s biggest developers.
Adam Spatacco has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
