Nvidia's Dual Play: Securing Supply Chains and Shaping Silicon Standards

Beyond GPUs, Nvidia invests billions to lock in optical components and backs RISC-V via SiFive to architect the future AI data center stack, fueling its record growth.

While the world focuses on the raw computing power of Nvidia's GPUs, the company is executing a less visible but critical strategy on two other fronts: securing the physical components to build AI systems and influencing the architectural standards that define them. Recent moves involving a key optics supplier and a strategic investment in an open-source chip designer reveal the depth of this planning.

The physical bottleneck for advancing artificial intelligence is increasingly not the processor itself, but the high-speed connections that link thousands of them inside data centers. This reality was underscored by a recent update from Lumentum, a major supplier of optical components. The company announced its order books are filled through 2028 due to demand from U.S. hyperscalers, with CEO Michael Hurlston noting enormous capital expenditures with no end in sight.

Nvidia moved early to lock down this supply chain, making a $2 billion investment to secure access to high-performance lasers for its GPU generations slated for 2027 and 2028. This preemptive strike guards against a parts shortage that could throttle the company's growth momentum in the coming years.

Concurrently, Nvidia is shaping the future compute landscape through strategic capital allocations. The chip giant recently participated in a $400 million Series G funding round for SiFive, a startup developing chip designs based on the open RISC-V architecture. The round, which closed oversubscribed on April 9, 2026, valued SiFive at $3.65 billion. The investment is more than financial; it has a clear technical rationale.

In January 2026, SiFive announced plans to integrate Nvidia's NVLink-C2C interconnect into its data center platform. This integration will allow RISC-V-based CPUs to connect directly to Nvidia GPUs with high bandwidth, reducing latency and improving system utilization for AI inference workloads. SiFive CPUs are designed to be compatible with Nvidia's Vera Rubin architecture, unveiled at GTC 2026 for agent-based AI.

SiFive CEO Patrick Little highlighted the market shift, stating, "Hyperscale customers have made it very clear that it is time to accelerate open alternatives for the data center."

This investment fits a clear pattern. Nvidia has built a substantial portfolio of strategic stakes, including holdings in cloud providers CoreWeave and Nebius Group, optics firms Lumentum and Coherent, networking component supplier Marvell Technology, Synopsys, and a $5 billion position in Intel. The objective is evident: to position Nvidia as an architect of the entire AI data center stack, from the GPU to the CPU interconnect.

Operationally, the company's performance remains staggering. For its fiscal fourth quarter of 2026, Nvidia posted record revenue of $68.1 billion, a 73% year-over-year increase. Full-year revenue climbed to $215.9 billion, up 65%. The company forecasts revenue of $78 billion for the first quarter of fiscal 2027.

Furthermore, Nvidia has visibility on a backlog exceeding $500 billion for its Blackwell and Vera Rubin chips through the end of 2026. CEO Jensen Huang has suggested these AI chips could generate at least a trillion dollars by 2027. Analysts at UBS point to the company's exceptionally high cash flow return on investment (CFROI) of 73%, which places it among the global elite.

Despite these formidable fundamentals, the stock has experienced turbulence. After a period of weakness in March, which saw hedge funds shed tech holdings at the second-fastest pace since 2011 according to Goldman Sachs data, the shares have mounted a recovery rally of over 10%. The stock currently trades at 160.26 EUR, nearly flat for the year with a slight decline of 0.52%. It remains roughly 11% below its 52-week high of 179.62 EUR.

Wall Street's conviction, however, appears undimmed. The average price target among analysts stands at $268.22. Major banks have issued bullish targets, including Bank of America at $300, Barclays at $275, JPMorgan at $265, and Morgan Stanley at $260. These targets reflect a belief that Nvidia's dual strategy of securing supply and steering architecture will sustain its dominance in the AI era.