Why Is Nvidia Hesitating on OpenAI?

Nvidia's Shifting Stance on OpenAI

First, consider Nvidia's shifting stance on OpenAI. In September, a press release stated Nvidia intended to invest in OpenAI. Now, CEO Jensen Huang says OpenAI invited Nvidia to invest $100 billion, and they will evaluate it step by step. This is a clear pullback. Initially, there was no firm signature on the deal, but now there seems to be less commitment from Nvidia regarding fulfilling the entire $100 billion. For OpenAI, this isn't a good sign. When the deal was initially discussed, OpenAI was leading the market. Now, with competition from Anthropic's Claude Code and Google's Gemini 3, there's uncertainty about betting on the winner. That's likely what Nvidia is reconsidering.

Commentary on OpenAI's Perceived Lack of Discipline

There's also commentary about a perceived lack of discipline at OpenAI. From Nvidia's perspective, OpenAI is pursuing too many markets: a device with Johnny Ive, enterprise bets, consumer bets. This could be seen as a lack of focus. If OpenAI were leading in every area, it might be different. But with competitors advancing in specific domains, it raises the question: does OpenAI need to sprawl or focus? What is its core winning product? That ambiguity might concern Nvidia.

Nvidia's Outlook for 2026

Looking ahead to 2026, Nvidia is poised to dominate AI infrastructure. Demand for its Blackwell systems and rising AI data center spending are key growth drivers. Here are three predictions for Nvidia in 2026.

First, Nvidia may outperform consensus sales expectations in fiscal 2027. The average revenue estimate is $323.3 billion. Tailwinds include hyperscalers migrating to rack-scale systems with GPUs, CPUs, networking, and software, not just chips. Coupled with strong Blackwell demand, Nvidia maintains pricing power. From early 2025 to 2026, revenue from Blackwell and next-generation Rubin systems could exceed $500 billion. The shift from training to inference workloads and a focus on power efficiency will drive upgrades to platforms like Vera Rubin in late 2026. This could boost demand. Larger customer deployments and recurring sales may push revenue above expectations, assuming shipments and AI spending remain strong.

Second, gross margins can stay around 75% in fiscal 2027, aligning with company guidance. Nvidia's business centers on high-margin data center GPUs and networking. Growth in software and services also helps. With Blackwell and Rubin, Nvidia has pricing power to withstand competition from AMD and others.

Third, Nvidia can maintain its discrete GPU market share in 2026. In Q3 fiscal 2025, it had a 92% global share, down 2 points. Despite competition from AMD and Qualcomm, Nvidia's ecosystem—CUDA software, developer tools, AI frameworks—creates switching costs for customers. This ecosystem advantage helps retain dominance even as rivals improve hardware.

Nvidia's Stock Performance Analysis

Now, regarding Nvidia's stock performance. Few stocks have done better recently. In 2023, it rose 239%. In 2024, it gained 171%. 2025 was quieter with a 39% increase. Investors wonder if it can double by 2026. It won't be easy. To double from a $4.5 trillion market cap to $9 trillion, Nvidia would rival Apple, Microsoft, and Amazon combined. But if financials support it, it's possible. Analysts expect 52% EPS growth in fiscal 2027 to $7.66. With a trailing PE of 46, if Nvidia earns $7.66 and trades at 46 times earnings, its value would be about $352 per share, nearing a $8.7 trillion market cap. A PE of 50 would mean $9.4 trillion. So, doubling isn't out of the question but requires maintaining high valuation. Even if it doesn't double, Nvidia is expected to perform well in 2026.

In recent trading, Nvidia closed at $185.61, down 2.89%. The stock's move was smaller than the S&P 500's 0.54% gain. The Dow rose 1.05%, and the Nasdaq gained 0.56%. Before this, Nvidia shares had risen 1.21%, outperforming the sector and S&P 500.

Upcoming Earnings and Valuation Metrics

Investors will watch Nvidia's upcoming earnings report on February 25, 2026. The company expects EPS of $1.52, up 70.79% year-over-year. Consensus forecasts sales of $65.6 billion, a 66.68% rise. Full-year estimates are EPS of $4.66 and revenue of $212.62 billion, implying year-over-year changes of +55.85% and 0%, respectively.

Recent analyst estimate changes can signal shifting business trends. Positive revisions may indicate optimism. Nvidia currently has a forward PE of 40.99, above its industry's 36.42. Its PEG ratio is 0.89, below the industry average of 2.09. Nvidia is priced for perfection, entrenched in the AI capex cycle. Any issues with OpenAI could impact sentiment.

CEO Comments and Market Position

CEO Jensen Huang addressed the investment rumors, saying, "No, nothing like that," when asked if it would exceed $100 billion. For traders, this means Nvidia is signaling support for a major AI customer despite guiding for $65 billion in quarterly revenue. Nvidia's stock price assumes strong, ongoing AI demand.

As of January 31, Nvidia's market cap was about $4.64 trillion. The trailing PE was 53.81, and forward PE approximately 29.94. At that multiple, the market expects growth to continue without slowdown, a concern with big tech spending.

Fiscal Q3 2026 Financial Highlights

Nvidia's fiscal Q3 2026, ending October 26, 2025, was strong. Revenue was $57.06 billion, up 22% quarter-over-quarter and 62% year-over-year. Net income was $31.91 billion, up 21% quarter-over-quarter and 65% year-over-year. GAAP gross margin was 73.4%. Diluted EPS was $1.30. The revenue is real, and guidance for fiscal Q4 is $65.0 billion plus or minus 2%, with GAAP gross margin around 74.8%.

The OpenAI Situation and Financial Standing

The OpenAI situation is key because Nvidia's stock bets on its ability to sustain such performance without demand dropping. Nvidia's financials show cash and equivalents of $11.486 billion, marketable securities of $49.122 billion, total liquidity of $60.8 billion, and 24.3 billion shares outstanding as of November 14, 2025.

Huang's potential announcement of a major investment draws market attention due to these strong finances. In its results, Nvidia mentioned a strategic partnership with OpenAI to use at least 10 gigawatts of Nvidia systems in OpenAI's next-gen AI infrastructure. That's significant.

Potential Complications and Industry Rivalry

However, a Reuters report suggests OpenAI has partially abandoned Nvidia, looking for alternatives due to dissatisfaction with some recent AI chips. This could complicate their relationship. It's surprising, as Nvidia is seen as the leading chip maker.

Where would OpenAI get more chips? Possibly AMD, but analysts say it lags Nvidia. Amazon has its Trainium 3, Google has Ironwood TPU, Microsoft has its own AI processor. Yet, Nvidia's dominance makes it hard for others to gain traction quickly. Another option is Groq, acquired by Nvidia for $20 billion, but it can still sell to others under the deal terms.

The tension may stem from Nvidia's reluctance to join a $100 billion OpenAI funding round. Huang stated there was no formal commitment. This erosion of conviction might reflect doubts about OpenAI's future valuation.

Rivalry among AI giants is intensifying. Elon Musk's SpaceX acquiring XAI provides funding access. Google's Gemini outperforms OpenAI in some areas, with Alphabet's vast resources. Smaller players like Anthropic are also competing. The AI field is now one of alliances and cross-investments. Nvidia and OpenAI are dominant, but tension between them marks a new chapter in the battle for AI supremacy.