A Wall Street analyst has cautioned Nvidia (NASDAQ: NVDA) investors that the chipmaker’s explosive growth may not be entirely organic.

To this end, Goldman Sachs’ James Schneider warned that part of Nvidia’s booming sales could stem from “circular revenue,” a cycle in which Nvidia’s own investments end up fueling demand for its products.

Schneider explained that Nvidia’s financial ties with companies like OpenAI create a situation where the tech giant acts as both supplier and investor. 

When Nvidia backs AI startups that, in turn, spend heavily on its GPUs, it can inflate revenue figures that may appear to reflect independent customer demand.

While this boosts short-term sales, Schneider cautioned that it could make Nvidia’s long-term growth less certain, as some of that demand relies on Nvidia’s own capital rather than external funding.

This caution comes against the backdrop of Nvidia’s $100 billion investment in OpenAI, a partnership set to deploy at least 10 gigawatts of Nvidia systems, including millions of GPUs, to power OpenAI’s next-generation AI models.

Goldman Sach new NVDA stock target

Despite the warning, Schneider remained positive on Nvidia’s broader position in the AI ecosystem. He raised his price target for the stock to $210 from $200, maintaining a Buy rating.

At the close of the last session, NVDA shares were trading at $187, down 0.7%, though the stock has rallied over 35% year-to-date.

Schneider highlighted that Nvidia’s growing network of AI partners, including OpenAI and Oracle, could continue driving substantial demand for its cutting-edge chips as the AI infrastructure race accelerates. 

He added that OpenAI alone may require up to $75 billion in equity and debt by 2026 to fund its infrastructure, underscoring the scale of future AI hardware demand.

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