Nvidia Plays Kingmaker Again. Why the Meta Deal Is a Winning Move.

Just days after Meta Platforms (NASDAQ: META) announced plans to raise $97.5 billion to fund its AI infrastructure build-out, the company is signing on a new partner: Nvidia (NASDAQ: NVDA).

Nvidia and Meta announced on Tuesday morning that they would expand their partnership around Muse and the Muse family of models, and Nvidia will invest $3 billion in Meta's new equity offering.

As part of the collaboration, Meta will expand Vera Rubin and Vera CPU deployment to boost performance and scale workloads.

Nvidia said that the surging growth of the new Meta Muse personal AI agent led to the expanded partnership.

What it means for Meta

For Meta, the company receives a $3 billion investment from Nvidia and helps ensure it has access to the chips and hardware it will need as it aggressively expands its AI capabilities and invests in new data centers and infrastructure.

Nvidia continues to dominate the market for AI chips and has much of the cutting-edge technology that hyperscalers need, so it's important for companies like Meta to establish a close relationship with Nvidia.

What it means for Nvidia

For Nvidia, it's the latest example of the company shoring up its AI empire by bringing customers, suppliers, and other stakeholders into its fold through a series of investments, partnerships, and contractual commitments.

These moves give Nvidia both preferred treatment among the partners that it needs most, putting it on the inside track in AI, and the investment it's made also gives it exposure to stocks like Meta, meaning their success is Nvidia's success.

At a time when companies like Meta, Anthropic, Space Exploration Technology, and others are raising massive amounts of capital, Nvidia is a reliable investor with deep pockets and a desire to invest across the AI spectrum, meaning we're likely to see more deals like this one.

As of the end of the second quarter, Nvidia already owned stakes in Intel, an integrated chipmaker; SpaceX, which has become fast-growing AI infrastructure company; CoreWeave and Nebius, two neocloud companies; Coherent, a provider of optics solutions for AI infrastructure; Synopsys, a specialist in electronic design automation (EDA); Nokia, a developer of AI-Radio Access Network technology, and Generate Biomedics, which uses machine learning and generative AI to design custom therapeutics.

The company has also taken stakes in OpenAI and Anthropic, ensuring it has close partnerships with the two leading AI labs and that they continue to buy its chips. It forged an agreement with OpenAI to invest up to $100 billion in the company as it deploys at least 10 gigawatts of AI data centers using Nvidia systems.

Why it's a winning strategy for Nvidia

Nvidia faces competition in the market for AI chips, most notably from Advanced Micro Devices. AMD has followed a similar playbook to Nvidia to a smaller degree and even announced a $1 billion investment in Meta shortly after Nvidia said it would invest $3 billion in Meta. However, Nvidia's leadership is going to be difficult to unseat, given its network of partnerships, deep relationships, and cutting-edge technology.

Nvidia will have to maintain its pace of innovation to ensure it keeps the technological lead, and it has done that since the launch of ChatGPT. In fact, SpaceX CEO Elon Musk recently declared that his Nvidia's Vera Rubin architecture was superior and said that SpaceX would exclusively build on Nvidia hardware.

Expect Nvidia to continue to forge more deals like the one it just did with Meta, especially as the AI infrastructure spenders look for new sources of capital. Nvidia is becoming a kingmaker, and that will only widen its economic moat as the AI boom continues.

Jeremy Bowman has positions in Advanced Micro Devices, CoreWeave, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Coherent, Intel, Meta Platforms, Nvidia, and Synopsys. The Motley Fool has a disclosure policy.