The US$100 billion Nvidia-OpenAI virtuous circle has an ugly side

TECH builders love a good feedback loop, and Nvidia and OpenAI have created a US$100 billion one this week.

Nvidia is investing the sum in OpenAI as part of a build-out of data centres, potentially nabbing 2 per cent of the company through the first US$10 billion tranche. The circle continues with OpenAI pledging earlier this month to spend US$300 billion on cloud compute from Oracle, which also buys chips from Nvidia. Meanwhile, Nvidia is pouring US$5 billion into Intel, while OpenAI is formalising a new corporate structure with its most important investor, Microsoft.

The high cost of developing artificial intelligence (AI) systems has meant that the fortunes of the world’s biggest tech companies are becoming deeply entangled, bordering on incestuous. For some, that’s a clear signal that we are in bubble territory. But that misses the point. This also shows troubling industrial consolidation almost certain to keep new entrants to the market locked out as policy concerns fall further into the background. Nvidia is now the world’s biggest company at a market valuation of US$4.5 trillion, while OpenAI is the world’s largest private tech firm, and in the act of propping one another up, they are pushing potential long-term costs down the line, from concentrating resources to stifling competition and shunting policy efforts.