Nvidia Without Huang: AI Startup Funding Under Pressure

The departure of Jensen Huang leaves Nvidia at a crossroads: the company is expected to be more selective and reduce the size of its investments in AI startups. Valuations could decline, and traditional funds may become more cautious, but this will not halt the overall momentum of the sector. Cloud and semiconductor giants are anticipated to take over, but their involvement remains uncertain, particularly in Europe.

Valuations Under Pressure and Cautious VCs, But No End to the AI Boom

Nvidia is now expected to be more selective in its new support and reduce the size of checks within its portfolio, which would contribute to a decline in valuations. Umesh Padval notes that Nvidia's presence reassured all investors at the table. Without this safety net, several players anticipate greater caution from traditional funds, with transactions potentially put on hold. However, few voices believe that this slowdown will be enough to extinguish the overall momentum of AI. Amulya Vishwanath emphasizes that founders and leaders must be accountable and that the ecosystem extends beyond a single person, adding that the talent pool must continue to thrive. In the immediate term, investors do not anticipate a quick recovery in the pace of deals.

What Nvidia Was Funding: Massive Tickets, From Infrastructure to Neoclouds

Nvidia's biggest bets targeted neoclouds, inference providers, and open-weight models, which are costly endeavors for small firms. The group supported the still-private CoreWeave and participated in two funding rounds for Crusoe, including a Series E of $1.4 billion. It announced the acquisition of Hugging Face for $13 billion, a deal expected to close in 2027, and holds stakes in Mistral AI, Lambda, and Black Forest Labs, often being the lead investor. Last year, Nvidia injected $800 million into a $2 billion Series B for Reflection AI before significant revenues, according to the Wall Street Journal. Under Jensen Huang, infrastructure companies needing $100 to $500 million in GPUs often received half that amount from Nvidia at valuations of $1 billion or more, a signal that attracted other investors. In recent years, the group committed tens of billions annually and participated in 105 funding rounds this year, often as a leader, according to PitchBook.

Change of Course: Kress More Conservative, End of an Era of Huang-Led Deals

Jensen Huang's resignation marks the end of a phase where significant investment decisions often came directly from him, according to Umesh Padval, who has known the leader since the acquisition of Mellanox for about $7 billion in 2020. Interim CEO Colette Kress is expected to make adjustments, particularly regarding the checks aimed at AI startups at the heart of data center expansion. Huang's aggressive approach had raised concerns on Wall Street. One investor describes Kress as significantly more conservative and does not expect her to commit comparable amounts to fuel the emerging ecosystem.

A Dependent Ecosystem, Contested Market Power

Investors remind us that Nvidia supported nearly all native AI startups, from applications to neoclouds. This omnipresence has sometimes created the image of a near-monopoly, with substantial checks effectively encouraging startups to adopt its chips, consolidating its position. In the short term, the absence of Jensen Huang reduces available capital and could affect deals, valuations, and competition. Maria Davidson warns that a change in trajectory would be a shock for many young companies. The abruptness of the news was summed up by a neocloud founder who spoke of a "bomb" effect.

Possible Successors: Clouds and Chips, But Europe Threatened If Support Ceases

If Nvidia becomes more cautious, spaces could open up for smaller rivals or larger competitors, with Google having announced two new chips this week. Investors hope that hyperscalers and other semiconductor manufacturers will take over. For Dharmesh Thakker, claiming the "crown" will require a product offering, an ecosystem, and a community capable of competing with CUDA, as well as financial means to match. However, he doubts that Google, Amazon, Microsoft, or AMD will invest hundreds of millions in pre-revenue infrastructure startups, even though they can support more mature players. Shamilla Bankiya reminds us that Jensen Huang championed open source and Europe, and that a withdrawal from the United States would create a funding and ecosystem gap that would be difficult to bridge. Finally, Zain Javid attributes the emergence of an ecosystem to his initiatives despite the high entry costs.