Nvidia's $24 Billion AI Deal Blitz and Questions on Circular Investments
Nvidia's $24B investment strategy in AI firms like Anthropic & xAI faces Wall Street scrutiny. Analysts question if the "circular investments" inflate demand for GPUs or represent a savvy ecosystem lock-in strategy.
Nvidia, the dominant manufacturer of the graphics processing units (GPUs) essential for artificial intelligence (AI) development, has faced growing scrutiny from Wall Street analysts regarding its aggressive investment strategy.
The central concern revolves around the "murky" nature of circular investments, which critics suggest may inflate demand for the company's chips and cloud the true quality of its soaring revenue.
The Scope of the Investment Blitz
Nvidia’s venture capital arm and strategic partnerships have seen a massive acceleration in deal-making. According to Pitchbook data cited in recent reports, Nvidia invested approximately $23.7 billion in AI firms through 59 deals in the first ten months of 2025, eclipsing its activity from the previous year.
This rapid spending is part of a larger portfolio that spans the entire AI ecosystem, from large language model developers to "neoclouds" specializing in AI infrastructure.
Major recipients of these funds include:
- Anthropic: A reported $10 billion partnership with Microsoft.
- OpenAI: A previous investment and a reported (though non-binding) $100 billion commitment to build AI capacity.
- xAI (Elon Musk’s company): A $6 billion investment.
The "Murky" Circular Investment Concern
The primary worry among some investors and analysts is that this investment strategy creates a circular financing loop:
- Nvidia invests billions of dollars into an AI startup (e.g., Anthropic, CoreWeave, xAI).
- The recipient startup uses that newly acquired capital to purchase large orders of Nvidia GPUs and networking gear to build out its data center capacity.
- These large orders are then recorded as Nvidia revenue, contributing to the company's record-breaking sales and justifying its high valuation.
Wall Street's concern is the potential for this practice to subsidize demand for its chips, rather than reflecting organic, self-sustaining customer spending. As Seaport analyst Jay Goldberg noted, the question is: "To what degree is Nvidia investing versus buying demand or subsidizing demand for its chips?”
Nvidia's Defense and the Ecosystem View
Nvidia CEO Jensen Huang and other company executives have defended the investment strategy, characterizing it as a savvy business practice designed to bolster the entire AI ecosystem built around their CUDA software platform.
- Strategic Growth: Nvidia argues that by backing promising AI model developers and cloud providers, they are cultivating the next generation of "multitrillion-dollar hyperscale companies" that will drive long-term demand for their products.
- Ecosystem Lock-in: The investments ensure that the most advanced AI workloads are optimized for Nvidia's hardware, strengthening the competitive moat provided by its CUDA software and hardware stack.
Despite Nvidia’s insistence on the strategic nature of the deals, the complexity and sheer scale of this "cross-sell, joint investment" activity have fueled an ongoing debate about the sustainability of the AI boom and the risk of a potential "AI bubble."
Fast Facts
What are "circular investments? and why are they a concern for Nvidia?
Circular investments refer to the practice where Nvidia invests billions of dollars into an AI startup, and that startup then uses the capital to immediately purchase a large quantity of Nvidia's own chips (GPUs).
How large is Nvidia's investment blitz, and which companies are involved?
Nvidia has aggressively deployed its capital, investing roughly $24 billion through dozens of deals in the AI sector in a recent period. This large-scale spending is central to its strategy to reinforce the AI ecosystem.
How does Nvidia defend its investment strategy against claims of 'buying demand'?
Nvidia defends its investments by positioning them as a long-term, strategic necessity to foster the entire AI ecosystem. CEO Jensen Huang argues that by funding promising AI model developers and cloud infrastructure companies, Nvidia is cultivating the next generation of hyperscale customers who will ensure decades of future demand for its GPUs.
