How Nvidia’s Massive OpenAI Investment Is Sending Chip Stocks Soaring

Semiconductor stocks rose globally on Tuesday based on the announcement that Nvidia would be investing $100 billion in OpenAI. The deal between OpenAI and Nvidia is a large-scale project that will see the AI lab build and deploy Nvidia systems that use 10 gigawatts of power. That figure is equivalent to 4 to 5 million graphics processing units (GPUs).

The impact of this announcement was immediately felt on Wall Street, as positive feelings sparked a boom in the global chip sector. The positive swing was especially noticeable among companies that have existing ties to Nvidia. However, the shift wasn’t only felt in the United States.

In Taiwan, shares of Taiwan Semiconductor Manufacturing Co., the company that manufactures chips for Nvidia, closed 3.5% higher than they did on Monday.

SK Hynix, the South Korean company whose chips are used by Nvidia, saw its shares surge by more than 2.5%. Samsung, which has long been considered a rival to Nvidia, also saw an increase, closing 1.4% higher than it closed on Monday, marking a positive trend across the industry.

Samsung doesn’t currently provide Nvidia with its high-bandwidth chips. However, investors are optimistic that the company will soon be granted permission to do so, which drove its value upward. Other supplies with no existing ties to Nvidia also reaped the benefits of Tuesday’s announcement.

Tokyo Electron, which is currently only listed in Japan, closed at a higher rate following the news. While investors still don’t know if Tokyo Electron will eventually become involved in the deal between OpenAI and Nvidia, the optimism is based on the potential impact on the artificial intelligence sector, and more specifically, the powerful chips used in the process. Should Tuesday’s announcement lead to more opportunities for companies like Tokyo Electron to get more involved in the sector, investors would reap the benefits.

Ben Barringer, a global technology analyst at Quilter Cheviot, said, “Ultimately, this is a broad market with lots of suppliers. It certainly isn’t a zero-sum game with only one winner, and indeed it appears investors are recognizing that.” Barringer went on to say, “While this deal may be negative in the short-term for Nvidia’s competitors, it is a sign that the AI trade is alive and well.”

In addition to the positive action on Wall Street, the rally in Asia also impacted European markets. BE Semiconductor, STMicro, and Infenion all saw increases during early trade hours across Europe. However, the news wasn’t all good in Europe.

ASM International, a semiconductor manufacturing firm, said that it expects fourth-quarter revenue to come in below earlier forecasts, largely due to the value of shares. The news also caused ASML to see a dip in value. ASML produces equipment that most chip companies in the world use for manufacturing. However, insiders believe that this is more of a blip on the radar than a long-term concern, as the news will eventually benefit equipment manufacturers.

It remains to be seen just how far-reaching the massive deal between OpenAI and Nvidia will be, but it’s safe to assume that tech stocks, and more specifically, artificial intelligence stocks, will continue to soar in value.