Nvidia May Be Raising Its Prices for Customers and Funding Their Competitors. Is That a Good Idea?

Nvidia is reportedly set to increase prices on its AI servers from next year. (Courtesy NVIDIA)

Key Points

• Nvidia has reportedly told some of its biggest buyers that prices for servers with its AI chips will rise by more than 15% starting early next year.
• Nvidia reportedly made a $6 billion deal to license AI startup Poolside’s technology and hire the majority of its engineers.
• Nvidia is also reportedly considering an investment in AI startup Perplexity at a $30 billion valuation.

Nvidia has a fraught relationship with its major clients. The chip maker’s latest moves to fund artificial-intelligence competitors and pass on price increases might make things even more tense.

Nvidia is making two major AI investments, according to recent reports. That’s doubling down on its canny strategy of using its huge cash flows to fund AI developers, as it seeks to avoid becoming overdependent on a few customers.

One recent Nvidia deal was a $6 billion arrangement to license AI start-up Poolside’s technology and hire the bulk of its engineers, The Wall Street Journal reported Saturday, citing documents and people familiar with the matter.

The move would supercharge Nvidia’s efforts to develop its own ‘open-weight’ AI models, meaning models that anyone can download, modify, and run on their own infrastructure. That potentially undercut demand for advanced models like OpenAI’s GPT or Anthropic’s Claude but spur competition overall and therefore demand for Nvidia’s hardware.

Nvidia is also looking at potentially investing in AI start-up Perplexity at a $30 billion valuation, according to technology-focused news outlet The Information. Nvidia has previously invested in Perplexity, which was reported to be valued at around $20 billion in a fund-raising round last September.

Investors haven’t always loved Nvidia’s strategy of effectively acting as the AI ecosystem’s bank and principal venture-capital backer. But Barron’s has argued it’s a smart use of the company’s excess cash, securing long-term demand with relatively small risk.

If funding the competition wasn’t enough, Nvidia might also anger its customers by raising its prices. The chip company has told some of its biggest buyers that the prices of servers with its AI chips are set to rise by more than 15% on shipments from early next year, reflecting higher memory costs, Bloomberg reported over the weekend, citing people familiar with the matter.

Nvidia didn’t immediately respond to Barron’s request for comment on its AI investments and reported price increases early Monday. Its shares were down 0.1% in premarket trading Monday.

Nvidia shareholders will likely be happy to see the company taking steps to defend its revenue and margins just ahead of its earnings this week—even if it does come at the cost of some difficult phone calls with customers.

Write to Adam Clark at adam.clark@barrons.com

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