An expanded partnership with MediaTek shows that Nvidia is interested in making its AI ecosystem compatible with the world of custom chips, a portfolio manager says
Nvidia, led by CEO Jensen Huang, is investing $3.5 billion in convertible bonds issued by Taiwan-based MediaTek.
Nvidia is showcasing the power of its balance sheet as it invests in one of its Taiwanese partners.
The chip giant on Monday announced an expansion of its partnership with MediaTek. Additionally, Nvidia said it is investing $3.5 billion in convertible bonds issued by the Taiwanese company.
It's the latest example of Nvidia forking over money to invest in a supplier or customer - a practice that is polarizing those on Wall Street. Some analysts say that these financing plays give Nvidia a competitive edge, while others argue the moves constitute "circular financing" that adds risk to the artificial-intelligence web.
Joe Tigay, a portfolio manager at Rational Equity Armor Fund, views the latest announcement as evidence of Nvidia's ability to use its balance sheet to grow its ecosystem.
"MediaTek gains the capital to build Nvidia-compatible chips, while Nvidia secures creditor protection, potential equity upside and a stronger partner without acquiring the entire company," Tigay said in emailed comments.
In his view, Nvidia's investments in its partners, in computing capacity and in AI applications will benefit the company in the long run if AI succeeds.
As part of the expanded arrangement, MediaTek will adopt Nvidia's NVLink Fusion interconnect technology, which allows custom AI chips and central processing units to work with Nvidia's hardware and software ecosystem.
The investment and collaboration "is strong evidence that custom XPUs and Nvidia's universal AI ecosystem can coexist synergistically," said Hendi Susanto, a portfolio manager at Gabelli Funds, referring to custom chips.
While MediaTek's custom chips are getting a boost from being in Nvidia's ecosystem, Nvidia is bringing in a new customer and platform for its sales, Susanto said in emailed comments. Therefore, the expanded partnership looks like a "win-win."
Using NVLink Fusion, MediaTek's customers will be able to build custom AI infrastructure, including accelerators, that is compatible with Nvidia's rack-scale systems and other architecture, Nvidia said.
"MediaTek is one of the world's great semiconductor companies, with exceptional expertise in system-on-chip design, connectivity, leading performance and power efficiency," Nvidia CEO Jensen Huang said in a statement, adding that the partnership opens the company up to new markets.
The chip companies will also continue collaborating on future generations of Nvidia's RTX Spark and DGX Spark chips, which allow personal computers used by consumers and compact AI supercomputers used by developers to run AI agents and models locally, and on platforms to support AI-powered vehicles.
The expansion shows Nvidia "continuing to boost its influence in the AI infrastructure ecosystem even beyond" its graphics processing units, said Paul Meeks, head of technology research at Freedom Capital Markets.
"Nvidia is just covering all its bases here & abroad," Meeks said in emailed comments.
While he sees the company eventually losing some share in the AI chip market, he sees it gaining share in other parts of the data-center market.
-Britney Nguyen
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