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Greetings!
We’re getting close to the year’s end, when reporters’ minds turn to predictions for the new year. So here’s one: I predict sometime soon Nvidia will announce it is investing billions of dollars into Meta Platforms, in exchange for Meta committing to continue using Nvidia’s AI chips. This is just a wild guess, to be clear, but it’s based on how Nvidia has responded to past competitive threats—by throwing money at companies to ensure they remain loyal customers and don’t jump to a rival.
As we reported on Monday, Google has been pitching companies such as Meta on using Google’s specialized AI chips. Our report sent Nvidia stock sliding as much as 7% on Tuesday, and prompted this sweet note from Nvidia on X. The stock reaction is understandable: Investors have been jittery about potential competition for Nvidia since its AI chip business exploded in the middle of 2023, a few months after OpenAI released its world-changing ChatGPT. Since then Nvidia’s quarterly revenue has expanded to $57 billion from $7 billion. An array of potential rivals, including Advanced Micro Devices, AI chip startups such as Groq and Google are eyeing the market. But our report was the first sign that one of those rivals was really getting any traction. (For more on our story today, check out The Information’s TITV).
What makes Nvidia vulnerable is its high prices, which lead to fat gross margins of around 73%, about 20 percentage points higher than those of AMD, one of its big rivals. As Jeff Bezos once reportedly said, “Your margin is my opportunity.” But while rivals can try to undercut Nvidia on price, Nvidia has plenty of ways to entice buyers to stick with it—including offering to help its customers finance their chip purchases. In September, a couple of months after The Information reported that OpenAI was getting close to using Google’s chips, Nvidia announced it would invest up to $100 billion in OpenAI as part of a deal in which the ChatGPT maker would use Nvidia’s next-generation chips. Similarly, Nvidia announced earlier this month it would invest $10 billion in Anthropic, which has primarily been using Amazon and Google chips, as part of an arrangement in which it would commit to using new Nvidia chips.
What’s important to understand is that Nvidia now has more financial firepower than even deep-pocketed tech giants like Google. Analysts expect Google’s free cash flow this year to fall 11% to $65 billion, while they expect Nvidia’s free cash flow to rise 59% to about $97 billion. This is, ironically, because Google, Amazon, Microsoft and Meta are all investing massive sums of money in AI—much of which is going to Nvidia. So Google and other big tech firms are sending money to Nvidia, which can use that money to stop its customers from defecting to Google! Brilliant. It’s one reason why Nvidia shareholders can rest assured the company likely won’t lose much market share anytime soon.
Trump’s Movie Tastes
The Ellison family’s Paramount Skydance demonstrated why it’s the Trump administration’s favorite entertainment company. Paramount is planning to release the fourth installment of “Rush Hour,” the movie franchise starring Jackie Chan and Chris Tucker, Hollywood outlets reported today. This follows on the heels of President Donald Trump personally urging the Ellisons to make the movie, Semafor reported earlier this week.
Trump has demonstrated already that there are few aspects of American life he doesn’t have an opinion about. What’s next? Will he tell video-streaming services to stop raising prices?
In Other News
• TikTok has hired former Boeing executive Ziad Ojakli to lead its U.S. public policy operations, replacing outgoing policy lead Michael Beckerman, who announced earlier this year that he was stepping down.
• Klarna, the Swedish “buy now, pay later” provider, said it will launch a U.S. dollar–backed stablecoin, KlarnaUSD, in 2026, as a way to reduce costs for consumers and merchants.
• Chinese tech giant Alibaba Group said Tuesday that revenue from its cloud computing business grew 34% in the quarter through September, thanks to increasing adoption of AI in the country.
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