Nvidia’s Chip Round-Trip Deals

What would you think if Apple set up a company to buy iPhones and then rented those devices back for use by Apple staffers? It would make you wonder, right? Yet that’s more or less what Nvidia has taken to doing. As we reported today, Nvidia has struck a couple of deals to rent its own chips from Lambda, a cloud startup Nvidia partly owns. Nvidia is paying Lambda a total of $1.5 billion over time for the two deals. The arrangements are similar to the deal Nvidia struck with CoreWeave, another Nvidia-backed cloud startup, which we wrote about earlier this year, around the time CoreWeave went public. 

Lambda also plans to go public, as we revealed this week. Let’s be clear about what’s going on. Nvidia invests in startups, which then buy its artificial intelligence chips. Nvidia then rents those chips back, spending several hundred million dollars a year in the process. The startups get to increase the chip rental revenue they report, which buttresses their ability to go public. Nvidia not only benefits from any increase in the startups’ value as a shareholder—it also gets to increase its own revenue from the chips that the startups are buying. Talk about a win-win!