Nvidia (NVDA) opened this week’s trading session with a strong gain on Monday. Shares added 3.93% to close at $183.61. News that it planned to invest “up to” $100 billion in OpenAI lifted the stock yet again. However, the stock chart and the investment catalyst are a concern.
Bulls might want to watch the stock momentum. It has traded in the $175 - $185 range since July, unable to break out. Fortunately, daily trading volume in NVDA stock suggests that the price has room to run higher. The forward price-to-earnings ratio is 39 times. Tesla (TSLA), by comparison, relies on promises of new product releases to lift the stock to a 251 times forward P/E.
On Monday, both OpenAI, backed by Microsoft (MSFT), and Nvidia said that they would build an AI data center that used Nvidia systems. This would consume at least 10 gigawatts of power. The strategic partnership would require millions of Nvidia GPUs. Such sales would justify NVDA stock trading at a high P/E ratio.
The deal solidifies Nvidia’s foundational moat in the AI market. It widens its lead over other chip suppliers such as Advanced Micro Devices (AMD).
Risk
Nvidia is reliant on OpenAI providing the funds for the firm to buy its chips. AI services risk a steep drop in monthly subscription rates. AI users have Alibaba (BABA), DeepSeek, Perplexity, xAI, and many other alternatives to ChatGPT.
Watch Nvidia stock in the next few months. The $100 billion deal is potential revenue, not realized.
Tech Insider
