NVDA: Jensen Huang’s Bold Take on AMD’s OpenAI Deal!

Introduction

In early October 2025, Advanced Micro Devices (AMD) stunned the AI hardware space by securing a multi-year deal to supply chips to OpenAI, even granting OpenAI warrants for up to a 10% stake in AMD ([1]). This landmark partnership, involving 6 gigawatts of AMD Instinct GPUs from 2026 onward, positions AMD as a key supplier to OpenAI and a stronger rival to NVIDIA (ticker: NVDA) ([2]). NVIDIA’s CEO, Jensen Huang, responded with a bold stance: rather than panicking, he emphasized that OpenAI’s need to dual-source chips only confirms the massive demand for AI compute – a market so large that even two chip giants aren’t enough to satiate it ([3]). Indeed, just weeks prior, NVIDIA itself had inked a $100 billion alliance with OpenAI to build 10 gigawatts of AI data centers, reinforcing its role as the primary AI hardware partner ([4]). In this report, we dive deep into NVIDIA’s fundamentals – from its shareholder returns and financial strength to valuation, risks, and red flags – to assess how Huang’s company stands amid intensifying competition and sky-high expectations.

Company & Market Overview

NVIDIA Corporation is the dominant player in GPU-based AI computing, leveraging a rich ecosystem (CUDA software, DGX systems, etc.) that has made its chips the backbone of modern AI models. Over the past two years, NVIDIA’s revenue and profits have exploded thanks to surging demand for AI acceleration in data centers. In the latest quarter, data-center GPU sales comprised 88% of revenue ([5]), driving total quarterly revenue to a record $46.7 billion (up 56% YoY) and net income to $26.4 billion ([5]). Such unprecedented growth has vaulted NVIDIA’s market capitalization above $1 trillion (making it one of the world’s most valuable companies) and firmly established it as the “AI arms dealer” for cloud giants and startups alike. Huang himself remains bullish, projecting $3–$4 trillion in AI infrastructure spend by 2030 and dismissing talk of an AI “bubble” ([6]). That said, competition is creeping up: AMD’s new OpenAI deal and other entrants signal that NVIDIA’s once-unchallenged lead will be tested going forward. Huang’s “bold take” on the AMD partnership – essentially welcoming a bigger ecosystem – sets the tone as NVIDIA navigates this next chapter.

Dividend Policy & Shareholder Returns

Despite its torrid growth, NVIDIA has historically paid only a token dividend. The company initiated dividends in 2012, but the payout remained modest – roughly $0.16 per share annually in recent years. In mid-2024, management enacted a 10-for-1 stock split (to improve trading liquidity) and simultaneously boosted the quarterly dividend by 150% to $0.01 per split-adjusted share ([7]). This equates to a mere $0.04 per share annual dividend, which at the current share price yields only ~0.03% – effectively negligible ([8]). The tiny yield reflects NVIDIA’s focus on reinvesting cash into growth and returning excess capital via buybacks instead of large dividends. Indeed, the company unveiled a massive $50 billion share repurchase authorization in 2024 ([9]). This buyback program dwarfs the dividend and has been a key tool for returning cash to shareholders amid the stock’s surge. For context, AMD’s dividend is zero (it pays none), so NVIDIA’s nominal payout is primarily symbolic. Investors in NVDA should not expect income; rather, the investment thesis hinges on capital gains from the company’s growth trajectory.

Leverage & Debt Maturities

NVIDIA’s balance sheet is extremely strong. The company carries about $8.5 billion of long-term debt (as of mid-2025) ([10]), a small sum relative to its ~$100 billion in shareholders’ equity and enormous cash reserves. In fact, NVIDIA’s cash and short-term investments have swelled to $56.8 billion (Q2 2025), more than 6× its debt load ([11]). This means NVDA sits in a net cash position – a rarity for a company of its scale – providing ample financial flexibility. The debt that does exist is mostly in the form of low-coupon senior notes spread over long maturities. For example, NVIDIA has outstanding bonds due 2026 ($1.0B at 3.20%), 2028 ($1.25B at 1.55%), 2030 ($1.5B at 2.85%), 2040 ($1.0B at 3.50%), 2050 ($2.0B at 3.50%), and even a 2060 maturity ($0.5B at 3.70%) ([12]). The nearest maturity after 2024’s note was repaid is the $1 billion due in 2026, and NVIDIA retains the right to redeem notes early if desired. With such long-dated, fixed-rate debt at modest interest rates, the company faces minimal refinancing risk or interest rate exposure. Credit agencies have taken note of NVIDIA’s fortress-like finances: Moody’s recently upgraded NVIDIA’s credit rating, citing its leadership in AI, booming revenues (projected $200B+ in 2026), and outstanding financial position ([13]). In short, leverage is very low, and NVIDIA’s liability profile is extremely manageable for the foreseeable future.

Interest Coverage & Financial Health

NVIDIA’s ability to cover its debt obligations is virtually a non-issue. With annual EBIT now on the order of tens of billions of dollars (over $26B of net income in a single quarter ([5])), the company’s interest expense – roughly a few hundred million per year – is trivial by comparison. In fact, NVIDIA likely earns more interest income on its hefty cash balance than it pays out on its debt, resulting in a net interest gain. As a result, traditional interest coverage ratios are off the charts – effectively hundreds of times over, indicating that earnings could crater and NVIDIA would still easily service its debt. For example, NVIDIA’s EBIT was recently estimated around $96 billion on a trailing basis ([14]), versus only ~$170 million in annual interest costs (assuming ~2% average coupon on $8.5B debt), implying an interest coverage well above 500×. Even under stress scenarios, the company’s debt load is not a constraint. NVIDIA’s robust cash flows (and minimal dividend outlay) have also led to rapid cash accumulation – a $35 billion hoard by late 2024 that doubled year-over-year ([15]). Management is now navigating how to deploy this cash, whether through continued buybacks, potential acquisitions, or other investments. The bottom line: financial health is excellent, and NVIDIA has ample capacity to fund growth initiatives or weather downturns without liquidity concerns.

Valuation & Comparables

By conventional metrics, NVIDIA’s stock valuation is lofty, reflecting investors’ extreme growth expectations. As of early October 2025, NVDA trades around 55× trailing earnings (P/E ≈ 55) ([16]). Its price-to-sales ratio is roughly 25–30×, far above the broader market average, and even high for the semiconductor industry ([17]). For instance, AMD – despite its recent AI-fueled surge – trades at about 13× sales and a 76× P/E ([18]) ([19]), lower on P/S but actually higher on P/E (because NVIDIA’s earnings have ramped faster). This suggests that while both AI chip leaders are richly valued, NVIDIA’s superior profitability tempers its multiples somewhat. NVIDIA’s price-to-book also exceeds 10× (with ~$100B equity against a ~$1+ trillion market cap ([8])), illustrating the premium on its intangible assets like intellectual property and software ecosystem. Traditional REIT metrics like FFO/AFFO are not applicable here – NVIDIA is not a REIT and its value lies in technology IP and growth, not steady cash yields. Instead, investors focus on PEG ratio (price/earnings-to-growth): given NVIDIA’s earnings have been growing triple-digits (% YoY) recently, the PEG might appear more reasonable. Still, any way you slice it, NVDA is priced for perfection. Bulls argue the valuation is justified by NVIDIA’s dominant position in what could be a multi-trillion-dollar AI market (with enormous forward revenue commitments) ([20]). Bears, however, point to the steep multiples as a risk if growth slows: at ~55× earnings, even a slight disappointment in results or guidance can trigger a sharp correction. We saw hints of this in 2024 when an “only” modest beat and guidance led to a stock pullback ([9]). Comparison to peers: Nvidia’s closest peers (AMD, and to a lesser extent Intel, Broadcom, etc.) have lower valuations in some areas, but none combine NVIDIA’s growth rate and margins. In summary, NVDA’s valuation is high by any standard – it encapsulates a belief that NVIDIA will continue to compounding its earnings at extraordinary rates for years to come.

Risks and Challenges

Competitive Threats: The most high-profile risk is intensifying competition in AI chips. AMD’s new partnership with OpenAI is a clear challenge to NVIDIA’s dominance, potentially seeding a viable second source for top AI customers ([2]). Over the next 1–2 years, AMD will deliver its MI450 GPUs to OpenAI, and if performance is competitive, AMD could steal market share or at least pressure NVIDIA’s pricing. Beyond AMD, other chipmakers and big tech firms are racing to develop alternatives: Google deploys its in-house TPUs, Amazon is designing custom AI chips (Trainium, Inferentia), and even OpenAI itself is working on an in-house AI chip with Broadcom’s help ([21]). Startups like Cerebras, Graphcore, and Intel’s Habana also aim to capture niche segments. So far, none match the performance + software ecosystem of NVIDIA’s GPUs, but this moat will be stress-tested by well-funded efforts. Huang has acknowledged the field is crowding, though he remains confident in NVIDIA’s years-long head start. A related risk is customer diversification away from NVIDIA: OpenAI’s AMD deal was partly motivated by not being 100% dependent on one vendor ([3]). Other cloud giants could follow suit for strategic redundancy, which might cap NVIDIA’s share of wallet even if AI demand keeps rising.

Geopolitical & Regulatory Risks: NVIDIA’s central role in advanced chips has put it in the crosshairs of U.S.-China trade tensions. U.S. export controls have restricted sales of NVIDIA’s top GPUs to China’s market, aiming to limit China’s AI progress. NVIDIA has navigated this by offering slightly downgraded versions (e.g. A800), but the risk remains that stricter bans could stifle a significant chunk of revenue or force product redesigns. There have even been accusations of gray-market “smuggling” of Nvidia chips to embargoed Chinese users (claims the company denies) ([22]). On the flip side, U.S. policy could shift – indeed, by mid-2025 both NVIDIA and AMD saw some approvals resume for selling certain chips to China ([22]), reflecting the push-pull of politics. Another regulatory risk is antitrust scrutiny: NVIDIA’s unprecedented $100B partnership with OpenAI and its overall 80–90% market share in AI accelerators have raised eyebrows ([20]) ([2]). Any perception that NVIDIA is “locking up” the AI compute market (through exclusive deals or investments) could invite investigations or remedies. For example, NVIDIA’s failed 2022 bid to acquire Arm shows regulators are willing to intervene to prevent potential monopolies. Now, as NVIDIA takes strategic stakes (it’s even investing $5B in Intel ([23]) and buying into OpenAI’s success), watchdogs may watch closely.

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Market Cycle & Demand Risks: Although AI demand looks insatiable right now, the semiconductor industry is notoriously cyclical. Investors must consider the sustainability of AI spending. Some industry voices – including OpenAI’s CEO Sam Altman – have warned of overinvestment or an “AI hype bubble” that could lead to a pullback ([6]). If cloud providers or enterprise AI projects hit a ROI wall, orders for high-end GPUs might suddenly slow. NVIDIA’s valuation leaves little room for such a pause. We’ve already seen that any hint of plateauing growth (or product delay, such as a brief next-gen chip delay Huang confirmed in 2024 ([9])) can jolt the stock. Also, consider customer concentration: a handful of major players (like Microsoft, Meta, Amazon, OpenAI) account for a large portion of NVIDIA’s data-center sales. If one major client changes strategy or faces financial issues (e.g. OpenAI’s own economics or funding constraints ([20])), NVIDIA could feel the ripple. Lastly, manufacturing dependency is a strategic risk – NVIDIA relies on TSMC’s foundries in Taiwan for nearly all its cutting-edge chips. Any disruption at TSMC (whether geopolitical or capacity-related) would directly hit NVIDIA’s ability to fulfill orders. While NVIDIA is diversifying some packaging and considering alternatives, it remains deeply tied to TSMC, which is an external risk largely out of NVIDIA’s control.

Red Flags & Open Questions

Despite NVIDIA’s remarkable performance, a few red flags merit investor attention. One is the scale of insider selling: with the stock’s meteoric rise, NVIDIA executives and directors have cashed out a substantial amount of shares. In the first half of 2024 alone, insiders sold roughly 770,000 shares (~$700 million worth) – the highest pace of insider sales in years ([24]). While executives take profits for many reasons (taxes, diversification) and Huang himself has held onto most of his stake, heavy insider selling can signal that those closest to the company consider the valuation rich. Another concern is the extreme investor euphoria around AI. NVIDIA’s stock has more than doubled multiple times in the last few years, raising the question: How much of its future is already priced in? If sentiment swings or if AI deployment economics disappoint, NVIDIA’s stock could be vulnerable to a sharp correction purely from multiple contraction, even if earnings remain solid.

There are also open questions about NVIDIA’s strategic direction going forward:

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– Can NVIDIA maintain its dominance as competitors advance? Huang’s confident rhetoric aside, AMD’s OpenAI deal is a real attempt to “challenge NVIDIA’s dominance in the AI GPU market” ([2]). In two years’ time, will we see a two-horse race with split market share, or will NVIDIA’s ecosystem keep it well ahead of AMD and others? The answer will determine if NVIDIA can sustain its current growth and pricing power.

– How will NVIDIA deploy its enormous cash flow? With free cash flow expected to exceed $200 billion over the next two years ([15]), NVIDIA could accumulate a war chest rivaling some of the largest tech companies. Will it pursue another transformative acquisition (despite the Arm experience)? Thus far, NVIDIA has invested in smaller growth areas (networking with Mellanox, various AI startups, even a stake in Intel’s foundry efforts ([23])). A major M&A move could be on the table, especially if regulatory winds shift – or the company might stick to organic growth and shareholder buybacks. This is an open question that could significantly shape NVIDIA’s future landscape.

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– Could regulatory action intervene in NVIDIA’s rise? As NVIDIA becomes almost the critical supplier for AI compute (with even firms like Google and Amazon briefing Huang on their chip projects to avoid surprises ([25])), governments might grow wary. Antitrust inquiries or restrictions (for example, limiting exclusive deals or requiring licensing of tech) are possible if policymakers view NVIDIA’s influence as a chokepoint. How NVIDIA manages its partnerships (like the OpenAI and Intel alliances) within legal bounds will be closely watched.

In conclusion, NVIDIA (NVDA) remains a phenomenal growth story at the center of the AI revolution, but it faces a more complex environment heading into 2026. Jensen Huang’s bold confidence in the face of AMD’s OpenAI gambit captures the ethos of NVIDIA’s strategy: rather than fear competition, use it to validate and expand the market. NVIDIA’s fundamentals – robust cash generation, prudent capital structure, and technological leadership – provide a strong foundation to back up this confidence. Yet, investors should keep eyes open to the risks of lofty valuation, intensifying rivalry, and external uncertainties. The coming years will test whether NVIDIA can continue to defy gravity in the stock market while executing in an evolving competitive landscape. As of now, Huang’s bet is that **demand will rise to meet even the boldest supply – and NVIDIA intends to supply everyone, AMD or not** ([3]). The market will be watching closely to see if that bet pays off.

Sources

  1. https://reuters.com/business/amd-signs-ai-chip-supply-deal-with-openai-gives-it-option-take-10-stake-2025-10-06/
  2. https://pcgamer.com/hardware/graphics-cards/amd-seals-multi-year-megadeal-with-openai-involving-6-gigawatts-worth-of-ai-gpus-and-a-possible-10-percent-stake-in-amd/
  3. https://apnews.com/article/a4714748ede46621863f4860f608ac98
  4. https://windowscentral.com/artificial-intelligence/openai-chatgpt/amd-openai-ai-compute-deal-billions
  5. https://tomshardware.com/pc-components/gpus/nvidia-posts-usd46-billion-revenue-in-another-record-quarter-data-center-and-gaming-gpu-sales-break-records
  6. https://itpro.com/technology/artificial-intelligence/jensen-huang-says-the-ai-race-is-on-as-nvidia-shrugs-off-market-bubble-concerns
  7. https://reuters.com/markets/europe/nvidia-shares-scale-new-peak-frankfurt-after-strong-forecast-2024-05-23/
  8. https://macrotrends.net/stocks/charts/NVDA/nvidia/dividend-yield-history/
  9. https://reuters.com/technology/nvidia-forecasts-third-quarter-revenue-above-estimates-2024-08-28/
  10. https://macrotrends.net/stocks/charts/NVDA/nvidia/long-term-debt
  11. https://macrotrends.net/stocks/charts/NVDA/nvidia/cash-on-hand
  12. https://sec.gov/Archives/edgar/data/1045810/000104581023000175/nvda-20230730.htm
  13. https://elpais.com/economia/2025-09-29/la-ia-y-sus-chips-tambien-cautivan-a-las-agencias-de-rating.html
  14. https://simplywall.st/stocks/cl/semiconductors/snse-nvda/nvidia-shares/health
  15. https://reuters.com/breakingviews/nvidias-growing-cash-hoard-points-ma-2024-11-18/
  16. https://macrotrends.net/stocks/charts/NVDA/nvidia/pe-ratio
  17. https://macrotrends.net/stocks/charts/NVDA/nvidia/price-sales
  18. https://macrotrends.net/stocks/charts/AMD/amd/price-sales
  19. https://macrotrends.net/stocks/charts/AMD/amd/pe-ratio
  20. https://reuters.com/business/view-analysts-react-nvidias-100-billion-investment-openai-2025-09-22/
  21. https://reuters.com/business/nvidia-invest-100-billion-openai-2025-09-22/
  22. https://pcgamer.com/software/ai/trump-praises-nvidia-ceo-jensen-huang-at-ai-summit-calling-him-a-great-guy-claiming-he-has-100-percent-market-share-and-his-company-is-impossible-to-catch-up-with-even-if-it-had-10-terrible-years-amd-ceo-dr-lisa-su-also-in-attendance/
  23. https://reuters.com/world/asia-pacific/nvidia-bets-big-intel-with-5-billion-stake-chip-partnership-2025-09-18/
  24. https://qz.com/nvidia-executives-directors-sold-700-million-shares-1851546312
  25. https://techradar.com/pro/emperor-jensen-nvidias-ceo-is-so-powerful-in-ai-that-even-google-and-amazon-inform-him-of-their-own-in-house-ai-chip-efforts-as-huang-doesnt-apparently-like-surprises

For informational purposes only; not investment advice.