Nvidia Corporation (NASDAQ:NVDA) shares traded at $194.97 early Tuesday, up $2.36 from the previous close, bringing its market capitalization to approximately $4.76 trillion. The modest gain came as investors digested a major partnership announcement that provides concrete figures on AI compute demand and potential revenue streams.
Firmus Deal Details
Firmus Technologies has signed a strategic compute agreement with Nvidia running through 2034, anchored by a 360-megawatt Nvidia DSX AI Factory in Batam, Indonesia. The facility is expected to house up to 170,000 Nvidia AI accelerators, including Grace-Blackwell, Vera-Rubin, and Vera models, with deployment targeted for 2027 and 2028.
Firmus projects customer offtake deals worth between $25 billion and $30 billion over the first six years of the partnership. This translates to approximately $147,000 to $176,000 per accelerator, or roughly $69 million to $83 million per megawatt of campus capacity. These figures represent contracted demand for cloud services running on Nvidia hardware, not direct Nvidia revenue.
Market Implications
The deal marks a shift in how AI investors evaluate the sector, moving beyond headline capital expenditure figures to focus on cash generation from GPU-powered data centers. Nvidia's revenue model under this agreement includes both hardware sales and a share of cloud service revenue, potentially establishing recurring, usage-based economics for its AI factory strategy.
"AI-native companies need scalable and efficient compute infrastructure that keeps energy use and costs down," Firmus co-CEO Tim Rosenfield stated.
Broader Market Context
Nvidia's outperformance relative to other chipmakers has narrowed recently, with Advanced Micro Devices (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), and the VanEck Semiconductor ETF (NASDAQ:SMH) posting larger percentage gains. The Philadelphia Semiconductor Index has surged 87% year-to-date, while the Magnificent Seven group, including Nvidia, Apple (NASDAQ:AAPL), and Alphabet (NASDAQ:GOOGL), is down for the year.
"AI is working for the providers. It is not working for the spenders," noted Jake Dollarhide, CEO of Longbow Asset Management.
Financial Context
Nvidia's core business remains far larger than the Firmus deal suggests. The company reported fiscal first-quarter revenue of $81.6 billion, up 85% year-over-year, with data-center revenue reaching $75.2 billion, a 92% increase. Nvidia guided for fiscal second-quarter revenue of $91.0 billion, plus or minus 2%, excluding any data-center compute sales from China.
The Bank for International Settlements warned in its annual report that if AI returns disappoint, it could sour financing and potentially turn the current capital expenditure surge into a downturn.
