Why Nvidia Stock Could be the Best Chip Bet in an AI Slowdown

A pause to artificial-intelligence development doesn’t sound like great news for AI chip stocks. But Nvidia might still be the best placed of the processor companies if a slowdown does happen.

The heads of major AI companies Anthropic and OpenAI —Dario Amodei and Sam Altman—agreed over the weekend that they needed to slow development of the technology. Altman also suggested OpenAI was unlikely to launch its initial public offering this year

Nvidia shares were down 3.6% in morning trading Monday. Among its AI chip peers, Broadcom was down 4.9% and Advanced Micro Devices was dropping 5.9%.

Let’s be clear, an AI slowdown led by Anthropic and OpenAI would be bad news for Nvidia. It might eventually reduce demand for its chips from two major customers and reduce or delay the benefit it expects from their IPOs.

Nvidia invested $30 billion in ChatGPT-developer OpenAI at a valuation of $730 billion in February. It agreed to invest up to $10 billion in Anthropic late last year, which CNBC reported at the time put Anthropic’s valuation at around $350 billion. Either of those two not launching an expected-mega IPO as planned would hurt.

But, at the same time, Nvidia has been reducing dependence on a few large customers by backing the wider AI ecosystem, investing in start-ups and supporting open-source AI models—meaning those free for users to download and modify. That contrasts with OpenAI or Anthropic, which generally maintain full control of their models. Nvidia just struck a $12.9 billion deal to acquire open-source AI development platform Hugging Face earlier this month.

Nvidia also has other major customers that might not necessarily participate in any voluntary let up in AI development. Elon Musk’s SpaceX for example. Although Musk posted over the weekend that he agreed with Anthropic’s Amodei calling for a slowdown, he didn’t make any explicit commitments. In fact, Musk posted on social media Sunday he was “highly confident” that SpaceX would launch Nvidia-powered AI servers in space next year.

Musk previously said SpaceX would exclusively use Nvidia hardware as it plans orbital data centers, sidestepping the limitations of land and power that are posing increasing obstacles for terrestrial facilities, although some skeptics doubt it will ever be economically viable.

If Musk is pushing on with Nvidia-powered AI servers in space and open-source developers keep buying Nvidia chips, it could offset any worries about Anthropic and OpenAI.