Nvidia is in the process of transitioning from a chip design company to a cloud services provider.
According to U.S. tech media outlet The Information, citing insiders, Nvidia is close to finalizing a deal to acquire a stake in cloud provider Lambda Labs. This follows an earlier acquisition of Lambda's competitor, CoreWeave.
The new capital involved in this transaction could reach $300 million, and with the inclusion of this new capital, Lambda Labs' valuation could exceed $1 billion.
Nvidia spokespersons declined to comment on the report. Lambda Labs CEO Stephen Balaban also refrained from discussing the company's relationship with Nvidia.
If the deal goes through, it will be Nvidia's eighth investment in private startups since March. Analysts believe Nvidia may sell GPUs to these cloud startups, shifting its target customer base from tech giants such as Amazon, Microsoft, and Google.
Following the release of ChatGPT, a global race in AI model development has ensued, further boosting GPU demand.
The report states that demand for Nvidia's most popular chip, the GPU A100, is so high that Amazon, Microsoft, Google, and Oracle have imposed restrictions on its rental to their cloud customers.
These tech giants, who are primary customers of Nvidia's AI servers, are also developing their own AI server chips and aim to market them, potentially becoming strong competitors for Nvidia.
In contrast, Lambda and CoreWeave pose less of a threat to Nvidia, as they do not design their own chips. Thus, Nvidia has a vested interest in helping them succeed.
At present, cloud providers have yet to offer Nvidia's latest chip, the H100, to customers on a large scale. However, Nvidia chose CoreWeave and Lambda as two of the first companies to use it when it was launched earlier this year.
Founded in 2012, Lambda reported over $20 million in revenue in 2020. At that time, the company's primary focus was on selling GPU-driven computers rather than renting out GPU cloud servers. Following a business pivot, Lambda's annual revenue is expected to reach hundreds of millions of dollars.
According to PitchBook, Lambda has previously raised $72.5 million from venture capital firms including Gradient Ventures under Google, Bloomberg Beta, and Mercato Partners.
Nvidia's stock price has soared more than 230% this year, with a market value exceeding $1 trillion. Its data center chip business has been a driving force behind this sales and profit growth.
Investors anticipate that this growth will continue as Nvidia replaces aging servers running traditional CPUs with servers that combine GPUs and CPUs on a single chip.
