Venture capitalist Lo Toney says OpenAI and Nvidia (NVDA) are following a path similar to Amazon’s early spending spree, a strategy that transformed the e-commerce pioneer into a $2.35 trillion company.
In a CNBC interview, the Plexo Capital founder points to Amazon’s (AMZN) aggressive investment in infrastructure as a blueprint for how technology bets can look risky before becoming indispensable.
He recalls how the company spent heavily on warehouses and logistics.
“Amazon did spend hand over fist, and many did not understand why they were doing that, couldn’t believe they were doing that. But ultimately, that bet paid off initially for Amazon, selling their own products and then ultimately opening it up through their marketplace so that sellers could build and sell on top of that infrastructure without having to build it. That was amazing.
I get the demand from Amazon’s marketplace, and I get the fulfillment from the distribution centers that they built, not even to mention what happened long term with AWS (Amazon Web Services).”
Toney says OpenAI and Nvidia appear to be following the same playbook.
“We can almost think of OpenAI doing something similar with Nvidia. Nvidia almost becomes kind of like the distribution centers — they want to make sure that there’s enough demand inside of that compute. And then you can look at ChatGPT as being a way that OpenAI is able to monetize from the consumer. They also sell to the enterprise.”
The venture capitalist says eBay and Apple (AAPL) also deployed similar strategies.
“But guess what. They also have the same analogy back to eBay with people that are building applications that use the OpenAI infrastructure — both the compute from Nvidia as well as the access to the APIs to power their own applications without having to build that out.
So I think about also on a smaller scale, Apple. If you look at the amount that they spent on equipment rollout to build iPhones, it was huge, and it was unprecedented at the time. But the iPhone also turned out to be an unprecedented hit from a single company as far as what people are willing to spend on smartphones.”
The news comes as Nvidia revealed an up to $100 billion commitment to OpenAI involving roughly 10 gigawatts of new capacity of Nvidia systems for OpenAI that could power the needs of over eight million US households.