Jensen Huang’s exit strains AI startup funding

Jensen Huang stepped down after 33 years leading Nvidia, and investors say his departure removes one of the startup ecosystem’s biggest backers. They expect smaller checks, lower valuations, and less certainty for AI startups that had relied on Nvidia’s money and support.

How Nvidia backed AI startups

Over the last several years, Nvidia poured tens of billions into startups each year and took part in 105 rounds this year alone, often as the largest investor, according to PitchBook. Maria Davidson, founder of Relational Capital, said that if that direction changes, it would be a big blow to many young companies. Dawn Capital’s Shamillah Bankiya said Nvidia is carrying almost every AI-native startup from application to neocloud.

Umesh Padval, managing partner at Seligman Ventures, said many of the significant startup investment decisions came from Huang himself. He has known Huang since serving on the board of Mellanox Technologies, the networking chipmaker Nvidia acquired for approximately $7 billion in 2020. Investors still hope Huang’s eventual successor will continue the dealmaking, but they do not expect that to happen soon.

What the money went into

Nvidia’s largest bets were on neoclouds, inference providers, and open weight models, which smaller companies are expensive to build. Zain Javaid, co-founder of the hardware company Ghost, said Huang’s initiatives were a big reason an ecosystem emerged anyway. Nvidia backed CoreWeave while it was still private and joined two of Crusoe’s rounds, including its $1.4 billion Series E.

The chipmaker also bought Hugging Face this year for $13 billion, expected to close in 2027, and holds investments in Mistral AI, Lambda, and Black Forest Labs. It was often the largest investor in those deals. Last year, it wrote an $800 million check into Reflection AI’s $2 billion Series B round before the open source startup began to earn meaningful revenue, according to The Wall Street Journal.

A shift in tone under Colette Kress

Nvidia’s interim CEO, Colette Kress, is expected to make some changes, especially in investments tied to the billion-dollar data center build-out. One investor described her as much more conservative and said she is unlikely to commit the same amount of money to keep the early-stage ecosystem going. Huang’s spending in this area had already worried Wall Street.

Bankiya said Huang believed in open source and in Europe, and that ending that support outside the United States would leave a funding and ecosystem gap no one else could fill. She said Nvidia’s retreat in other regions, including Europe, would be a massive gap.

Valuations, rivals, and the cap table effect

Nvidia’s generous checks also helped lock startups into using its chips, which strengthened its market position. The company’s dominance in the ecosystem was so strong that it could feel like a monopoly at times. If Nvidia becomes more conservative, more room could open up for rivals and smaller competitors, and Google announced two new chips this week amid Huang’s Nvidia fallout.

Some investors hope cloud companies and other chipmakers will step in to fill part of the gap. Dharmesh Thakker, a general partner at Battery Ventures, said Big Tech rivals may compete for Nvidia’s investment crown depending on who can bring a strong product, ecosystem, community, and the financial power to bankroll the ecosystem. He said CUDA is Nvidia’s software platform that lets developers run AI models on its GPUs.

Thakker said companies such as Google, Amazon, Microsoft, and AMD may back mature startups to drive adoption of their chips and clouds, but he doubts they will pour hundreds of millions into pre-revenue infrastructure startups the way Nvidia did. One VC said infrastructure companies that needed $100 million to $500 million in GPUs often raised half that amount at valuations of $1 billion or more from Nvidia just to get started, and Nvidia’s participation gave other investors confidence to back those companies at those lofty valuations.

What happens next for founders

Nvidia is expected to become more selective with new startups and write smaller checks into existing holdings, which could push valuations down. Padval said that when Nvidia was on the cap table, everyone felt safe. Without that backing, investors say traditional VCs are likely to hesitate before writing checks and may pause some deals.

Few people think the slowdown alone will stop the wider AI boom. Amulya Vishwanath, a former Nvidia employee who now runs her own VC fund, said founders and leaders must be held accountable, and that the ecosystem is bigger than one person. “That talent will, and must, continue to thrive.”