This year, I have invested in 20 companies like crazy. "NVIDIA has so much money to spend."

2023 was a year of big earnings for Nvidia, as they embarked on a crazy buying spree. According to reports from The Information and PitchBook data, Nvidia has already invested in 20 companies this year, while top venture capital firm Tiger Global has only invested in 30.

Investing in clients and themselves

Record-breaking GPU sales have put Nvidia at the peak of AI hype. In the second quarter of this year, Nvidia's revenue reached $13.5 billion, doubling from the same period last year. It is expected that revenue will further increase by 170% in the third quarter. This company, which benefits from a grand technological revolution, has more money than it knows what to do with.

However, as pointed out in a previous article by Wall Street News, as the generative AI wave continues to advance, the supply and demand of GPUs will tend to balance, and Nvidia's explosive growth in performance will also slow down.

Therefore, before that day arrives, Nvidia is actively investing in the future. Whether it's clients, partners, or acquisition targets, as long as it's related to AI, Nvidia is willing to spend some money to make friends.

Just this Thursday, software startup Databricks announced that it has raised $500 million at a valuation of $43 billion, with Nvidia participating. In addition, Nvidia also participated in a $125 million investment in chip startup Enfabrica, led by Atreides, this week.

Other recent investments by Nvidia include Cohere and Adept, competitors of OpenAI, as well as Hugging Face, which provides open-source tools for developing AI software.

It is worth noting that many of Nvidia's investment targets are actually their own clients. The money they invest may be earned back in just a few days by selling GPUs. Most of Nvidia's investments are co-investments, and they do not compete with traditional venture capital firms. Therefore, the key purpose of Nvidia's investments is not financial returns, but rather "making friends" and maintaining customer loyalty.

Critics argue that Nvidia's investment in startups while also earning revenue from these companies constitutes "round-tripping." Previously, rumors circulated about Nvidia colluding with major customer and cloud service provider Coreweave in financial fraud. However, analysts have already exposed these rumors as baseless speculation from those who lack a basic understanding of finance.

The basic fact is that these startups need cash, and they also need chips. Moreover, being associated with Nvidia's brand helps boost their visibility in the primary market and attract the interest of other investors.

Nvidia's money spree may not last long

However, history has shown that investment frenzies led by technology companies usually do not last long.

During the tech stock bubble two years ago, we saw the same scenario play out. When Stripe, a cross-border payment company, rose to fame, it led a wave of investment frenzy. However, as the pandemic subsided and the interest rate hike cycle began, the speculation in technology stocks receded, and Stripe also took a big step back from venture capital deals, only conducting three investments this year.

In the past, FTX, which has already gone bankrupt, also invested over $1 billion in start-ups, and now these equities have become part of FTX's bankruptcy assets.

Scott Lenet, co-founder of Touchdown Ventures, a company that helps businesses establish venture capital departments, told The Information:

"The launch of CVC funds by blockchain start-ups without proper governance or best practices may serve as a cautionary tale. Investing - whether strategic or otherwise - is still an art that requires processes and oversight."