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What would you think if Apple set up a company to buy iPhones and then rented those devices back for use by Apple staffers? It would make you wonder, right? Yet that’s more or less what Nvidia has taken to doing. As we reported today, Nvidia has struck a couple of deals to rent its own chips from Lambda, a cloud startup Nvidia partly owns. Nvidia is paying Lambda a total of $1.5 billion over time for the two deals. The arrangements are similar to the deal Nvidia struck with CoreWeave, another Nvidia-backed cloud startup, which we wrote about earlier this year, around the time CoreWeave went public.
Lambda also plans to go public, as we revealed this week. Let’s be clear about what’s going on. Nvidia invests in startups, which then buy its artificial intelligence chips. Nvidia then rents those chips back, spending several hundred million dollars a year in the process. The startups get to increase the chip rental revenue they report, which buttresses their ability to go public. Nvidia not only benefits from any increase in the startups’ value as a shareholder—it also gets to increase its own revenue from the chips that the startups are buying. Talk about a win-win!
Nvidia is supposedly striking these deals at least partly to seed the cloud landscape with a greater array of companies, ensuring that it will be less dependent for its chip sales on the big cloud firms such as Amazon Web Services and Google Cloud. Those large tech firms are major Nvidia customers but have simultaneously developed their own chips to compete with Nvidia’s. It makes sense for Nvidia to support potential customers. But it could limit that support to investments—why is it also renting back its own chips from these companies? According to our story today, Nvidia’s own researchers will use the chips it is renting from Lambda. Surely there’s a simpler way for Nvidia to arrange for its staff to use its own product than selling chips to a third party and renting them back.
At the very least, Nvidia should disclose more about these arrangements. For instance, how much of its revenue is coming from companies in which it has an interest? How is it treating that revenue—is it offset against the money it is spending to rent back the chips? Nvidia hardly needs to strike these deals to juice its own business or to make what’s surely a trivial amount of money on cloud startup investments. Demand for its AI chips is so great that it can barely keep up. But more transparency would be helpful for investors to understand what’s going on.
Atlassian’s Browser Bet
Is enterprise software firm Atlassian getting desperate to change the narrative? Like other software stocks, Atlassian’s has gotten beaten up a bit this year, as investors fret about how AI will affect the sector. On Thursday, though, Atlassian folks had something else to talk about. The company said it would spend $610 million in cash to buy The Browser Co., maker of an AI-centered web browser.
Why would an enterprise software firm buy a browser, you might ask? Atlassian’s explanation is that existing web browsers are “unable to connect business processes, holding up work,” and it plans to ensure The Browser Co.’s browser is “optimized” for subscription software apps. Atlassian Product Chief Sanchan Saxena said on The Information’s TITV today that “knowledge workers are not watching two and a half hours of Instagram, YouTube” and instead need work apps better arranged than is now possible on their browsers.
Hmm. We’d bet quite a few “knowledge workers,” as Saxena calls white-collar employees, probably are spending much of their day on Instagram. We’d also bet it’s tougher than Atlassian thinks to persuade everyone to ditch their existing browsers.
Atlassian is probably best known for Jira, a tool workers can use to collaborate on projects. But it has various other services aimed at making it easier for workers to use their various work apps, including Rovo, its AI search tool, which has chat capabilities. It also has Confluence, a workspace meant to “get everyone on the same page.” Will adding a browser to that mix do much for its business? Investors certainly don’t seem to think so: The stock dropped 2.6% on Thursday. So far this year it is down 31%.
In Other News
• Google CEO Sundar Pichai and IBM CEO Arvind Krishna appeared alongside First Lady Melania Trump at a White House event Thursday focused on using AI in education.
• JetBlue and Amazon have struck a deal for the airline to use Amazon’s Project Kuiper still-to-launch satellite internet service to power the Wi-Fi on some of the air carrier’s flights, the companies said Thursday, marking the first agreement between Project Kuiper and an airline.
• Broadcom said Thursday that its revenue from designing artificial intelligence chips and related networking equipment rose 63% in the fiscal quarter that ended Aug. 3 to $5.2 billion from the same period last year, beating its earlier projection of $4.4 billion in the quarter.
• Crypto treasury stocks dropped after The Information reported Thursday that Nasdaq is stepping up its scrutiny of companies that plan to raise capital to buy and hoard crypto.
Today in The Information’s TITV
Check out today's episode of TITV in which we talk about Rogo's aspirations to automate Wall Street work with AI with its new spreadsheet agent acquisition.
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