Nvidia has signed a $1.5 billion deal to lease 18,000 of its GPU servers to AI cloud startup Lambda over four years. This strategic move supports smaller cloud providers competing against giants like Amazon and Microsoft while boosting Lambda's financial strength as it approaches an IPO.
Lambda will become Nvidia’s largest customer through this deal, which includes a $1.3 billion lease for 10,000 servers and an additional $200 million contract for 8,000 more. The startup aims to exceed $1 billion in cloud revenue by 2026 as it prepares for a public market debut.
What is the significance of Nvidia’s $1.5 billion GPU rental deal?
This deal allows Nvidia to supply GPUs while backing a growing cloud startup, leveraging a circular business model as the company uses these servers internally. It demonstrates Nvidia’s dual role as a supplier and customer, supporting specialized cloud services amid increasing AI demand.
The agreement also represents a large financial commitment that strengthens Lambda’s resources, positioning it for strong growth and an IPO valued between $4 billion and $5 billion. This collaboration may encourage other cloud startups to seek similar partnerships.
Did you know?
That over half of generative AI companies cite GPU availability as a major bottleneck for scaling AI services.
How will this deal impact Lambda’s upcoming IPO?
The $1.5 billion lease boosts Lambda’s financial momentum ahead of its anticipated IPO, scheduled for the first half of 2026. With investment banks like Morgan Stanley and J.P. Morgan onboard, the deal supports Lambda’s valuation and growth projections.
Lambda's cloud revenue nearly doubled in the first half of 2025, indicating rapid expansion. This GPU rental agreement reinforces its market position, attracting investors by showcasing access to advanced hardware and strong backing from industry leader Nvidia.
Why is Nvidia renting its own GPUs to a cloud startup?
Nvidia’s GPU rental helps smaller cloud providers compete against hyperscalers investing in their AI chips. By leasing servers instead of direct sales alone, Nvidia secures market share and tightens its ecosystem around AI infrastructure.
This approach mitigates severe chip shortages impacting the AI cloud industry by circulating existing hardware resources. It also provides Nvidia with multiple revenue streams and greater control over its GPU deployment in the market.
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What challenges does this deal address in the AI chip market?
The AI chip industry faces shortages, making GPU access a significant bottleneck. Over 50% of generative AI companies report GPU availability limits their scaling. Nvidia’s GPU rental offers alternative access to crucial hardware, bypassing high prices at major cloud providers like AWS.
This promotes fairness for smaller AI developers and cloud services, thereby encouraging competition and innovation. The rental model may also temper pricing pressures caused by supply-demand imbalances in GPUs.
How does this partnership affect Nvidia’s position in AI cloud services?
This deal reinforces Nvidia’s dominance by integrating supply, investment, and customer roles. It underlines the company’s strategic move to support a network of specialized cloud providers alongside giants such as Amazon and Google.
The partnership raises questions about transparency due to circular revenue flows but enhances Nvidia’s control over AI cloud infrastructure growth. It signals the company’s long-term vision to maintain leadership in AI chip markets while enabling emerging players.
Nvidia and Lambda’s collaboration reflects broader trends where chip makers pursue innovative deals to address market shortages and customer concentration risks. Moving forward, such partnerships could redefine competitive dynamics in AI cloud computing.
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