Nvidia's AI Investment Loop Could Be Keeping GPU Prices High for a While

The fallout from the current controversy at Nvidia could have ripples beyond the company's leadership and growing AI business. New concerns have emerged over the supply of graphics cards after a new report claims the chipmaker helped fund AI startups that later bought its GPUs. If the company shifts its strategy, PC gamers may eventually see stock rise and prices fall.

The allegations come as scrutiny intensifies over Nvidia's priorities under co-founder Jensen Huang, who has been with the company for more than three decades. The company's business has increasingly centered on AI accelerators and data center infrastructure, with gaming graphics cards accounting for a smaller slice of its overall business. This change has only added to the frustration of consumers already dealing with GPUs that are way too expensive.

Questions raised over Nvidia circular financing allegations.

According to the Wall Street Journal report, Nvidia invested in AI startups, which in turn used the money to buy Nvidia hardware and build data centers. This arrangement has been described as circular financing. The report suggests that the practice may have helped sustain demand for Nvidia chips, as some customers struggled to deploy the equipment they purchased.

The report also describes an August meeting that Huang and top finance staff, including CFO Colette Kress, attended. During a discussion of a proposed $250 billion deal with OpenAI, Kress reportedly argued for reducing circular financing arrangements, which Huang reportedly rebuked. "These are unproven allegations, not proven facts, and the whole picture has yet to be established.

The alleged deal also raises questions about how much demand for AI hardware is driven by the growth of active data centers. The worry is that Nvidia will lend money to smaller companies, which will then use it to buy its chips. These companies are expected to construct data centers and lease computing power to customers like Anthropic and OpenAI.

The pace of data center expansion could constrain GPU supply.

But it's not simply a matter of buying processors to build data centers. Local opposition, planning constraints, and limited electricity infrastructure can delay projects, leaving hardware sitting around waiting for facilities that aren't ready yet. The transcript also mentions reports of memory and chips sitting in warehouses after technology companies purchase them. If supply is limited this way, fewer products may be available to other buyers.

For PC gamers, who still shell out a lot for graphics cards, this could be a big deal. A single retail listing for the RTX 5070, originally priced at about $500, was listed for $879-900. The RTX 5070 Ti was rumored to sell for about $1,500, and AMD's Radeon RX 9070 XT was said to cost over $1,000.

Expensive graphics cards are getting more expensive.

The gap between current listings and the launch price is even more pronounced for the high-end cards. The RTX 5090 was priced at as much as $8,000, up from the $2,000 it originally cost. The RTX 5080 was supposed to be a $1,000 card, but it was expected to cost around $2,000. Although individual retailer listings don't cover all markets, these examples show the pressure buyers face.

The second-hand market has not been the relief many PC builders once hoped for. Even in the past, older products like the RTX 4070 and RTX 3080 were still being listed at what were considered excessive prices for aging hardware. When new graphics cards get more expensive, used graphics cards can hold their value rather than crash when new generations come out.

Budget graphics cards are getting harder and harder to find.

That's a world away from previous generations of GPUs, where budget cards offered a relatively easy path into PC gaming. Take AMD's Radeon RX 480, for example. Released in 2016, it launched at around $200 for the 4GB model. The transcript argues that current demand for high-VRAM cards and high memory costs make it harder for manufacturers to justify similar low-cost products.

Manufacturers feel less pressure to focus on cheap graphics cards, especially with high demand for high-VRAM GPUs. This presents yet another obstacle for budget-minded PC gamers who want to play the latest games without breaking the bank. If the reported supply problems are partly related to circular financing, changes to those arrangements could eventually ease market pressure.

Maybe it's Nvidia's approach that will decide the future.

A shift in Nvidia's leadership strategy could change that picture. The report suggests Kress is less likely to keep the financing arrangements, raising the prospect that the company may cut them. If so, and if it's accompanied by either more data center capacity or less stockpiling, more GPUs may end up in the wider market. However, neither outcome is guaranteed.

Cheaper graphics cards are a possibility at this point, not an imminent guarantee. The allegations are not conclusive, and Nvidia has not confirmed that it has artificially created a GPU shortage. PC gamers will be looking for signs from its future leadership, how the company's financing practices and reporting will be conducted, and how it will herald the return of affordable prices.