Nvidia has announced it will sign deals with high-growth startups that allow them to pay for computing capacity by handing over a percentage of their future revenue. The company stated on Thursday, "Our newly launched partnership initiative gives AI startups token-based credits to fuel their product building." Under the arrangement, cloud-native AI companies, model creators, and other businesses will split product and cloud income with Nvidia, which acts as a middleman to give startups direct use of full-stack systems running on its chips.
Nvidia's move underscores the critical need for AI startups to access scarce computing power; graphics processing units are often likened to oil and are reportedly exchanged via futures contracts as firms face fluctuating prices and supply shortages.
Separately, AI companies are more often striking revenue- and equity-sharing pacts with chip manufacturers to get around the cash-flow problems that plague the industry. For instance, OpenAI has signed multiple agreements that involved it purchasing shares or accepting funding from partners such as Amazon and AMD, as reported by CNBC in January.
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Earlier this month, Nvidia announced plans to raise debt, which according to sources could total at least $20 billion. The company plans to allocate the funds for general corporate needs, such as paying down and refinancing current debt.
The revenue-sharing program offers a path for startups that need Nvidia's GPUs but may lack upfront cash. Nvidia gains a long-term income stream tied to customer success, but also takes on risk if those customers fail to generate revenue.
The growing demand for Nvidia's chips, driven by the explosion of generative AI, has created a competitive market where startups often struggle to secure the hardware they need. By offering revenue-sharing deals, Nvidia effectively acts as a venture capital-like partner, betting on the future success of these companies while ensuring its own chips are used. This model also helps Nvidia lock in long-term customers and potentially reduce the volatility of its own revenue streams.
At the 4th Supply Chain Expo in China, Nvidia's exhibit showcased humanoid robots, captured by Johannes Neudecker of Picture Alliance via Getty Images.
The scarcity of Nvidia's GPUs has led to creative financing solutions. Besides revenue-sharing, some AI companies have turned to equity-sharing deals, as seen with OpenAI's agreements with Amazon and AMD. Additionally, the comparison of GPUs to crude oil highlights the volatility in pricing and supply, driving the need for long-term commitments like Nvidia's new program. The company's debt financing plans further indicate its aggressive investment in expanding production capacity to meet relentless demand from AI developers and cloud providers.
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