Meta is doubling down on Nvidia AI chips, committing to spend tens of billions of dollars on the chipmaker's newest offerings and sending shares of both companies higher.
Why it matters: Even though Meta is already one of Nvidia's biggest buyers, the deal is so big that it stands to boost both companies.
Driving the news: Meta will buy millions of chips from Nvidia, ranging from standalone Grace CPUs to next-gen Blackwell GPUs and upcoming Vera Rubin systems, to use across its U.S. data center buildout.
- This makes Meta the first Big Tech firm to commit to buying standalone central processing units from Nvidia, which are used to run AI rather than train AI.
- This signals a shift toward inference over training, with the latter typically requiring more intense and expensive general processing units, or GPUs
- Financial details of the deal were not disclosed.
Between the lines: Meta is locking in scarce next-generation compute at a time when Nvidia's Blackwell GPUs are back-ordered and rivals are scrambling for supply.
Zoom out: It's a signal that there's still strong demand for compute power amid the AI buildout.
- Hyperscalers — the companies behind the largest data center buildouts — are on track to spend $650 billion this year.
- Chip companies like Nvidia stand to benefit from that, as their chips are seen as the best — and most expensive — on the market.
- Any sign of a slowdown in spending tends to hurt Nvidia shares, but a deal like this is a balm for investors who've been increasingly skittish about how long the AI spending spree can last.
Follow the money: "The question of why Meta [is] deploying Nvidia's CPUs at scale is the most interesting thing in this announcement," Ben Bajarin, chief executive and principal analyst at tech consultancy Creative Strategies, told The Financial Times.
Threat level: It's yet another example of circular funding and more spending from AI players.
- Meta is expected to spend about $135 billion on its AI ambitions this year, a number that's expected to continue going up.
The intrigue: Google, Amazon, Microsoft and even Meta have all announced new in-house chips in the past few months, which are seen as more affordable alternatives.
- Meta was reportedly considering using Google's TPUs, according to CNBC.
- Shares of AMD, a competitor to Nvidia, fell after the deal was announced.
The bottom line: This agreement makes clear that, at least for the next phase of the AI race, Nvidia is the backbone of Meta's compute strategy.
