Nvidia Invites Investor Scrutiny of Capital Spending With Perplexity Talks

The Earth revolves around the sun, and quarterly earnings revolve around Nvidia. The world’s most valuable company reports tomorrow, giving investors a peek at a balance sheet that the tech industry interprets like a tarot deck. 

Analysts expect Nvidia’s fortunes to hold strong for the second quarter, with Bloomberg’s experts predicting a 96% jump in the chipmaker’s revenue compared to the year-ago period. The hyperscalers Nvidia counts on, including Amazon, Google and Microsoft, have been reporting strong cloud growth, signaling their spending isn’t slowing.

But as fears mount around massive AI spending, investors will be scouring Nvidia’s capital outflows for signs the industry can sustain its growth. Over the weekend, The Information reported on a new deal in the works between Nvidia and AI search engine Perplexity that could signal Nvidia’s spending is still ramping up. 

Buying the Whole Neighborhood

Nvidia is putting its massive cash flow to work, with The Information reporting on Sunday that the chipmaker is in talks to invest in Perplexity. The fund infusion would juice Perplexity’s valuation to $30 billion, up more than 50% from its last round a year ago. 

The deal would expand Nvidia’s growing role as a landlord of sorts in the AI industry: 

• The deal would secure Nvidia a stake in Perplexity ahead of its planned IPO in 2028. It also gives Nvidia a foothold in inference, meaning AI that processes users’ prompts and responds with relevant outputs. In Perplexity’s case, that means generating search results. As Google has shown, curating search can be a powerful role, but rivals, including Google itself, abound.
• Nvidia also said this month it’s teaming up with Wall Street to help mobilize $500 billion toward AI infrastructure development. In addition, the chipmaker plans to line up as much as $105 billion to help SB Energy and OpenAI build an 8-gigawatt data center in Ohio (that’s enough energy to power millions of homes).

AI’s Warren Buffett: Nvidia’s earnings are starting to feel like a Berkshire Hathaway event, where people hang on CEO Jensen Huang’s every word like they did with Warren Buffett, according to Zacks strategist Brian Mulberry. Investors are paying close attention to which AI companies get Huang’s Midas touch, and which don’t.