Chipmaker Nvidia bought its longtime headquarters in California's Silicon Valley in one of the region's largest office deals by total price since the COVID-19 pandemic and the latest sign of demand from artificial intelligence companies.
The supplier of chips for artificial intelligence language models paid $374.3 million for seven properties totaling roughly 626,200 square feet in Santa Clara, a tech-focused city near San Jose in the soithern part of the Bay Area where the company has been expanding its office and research operations over the past two decades. Nvidia has occupied space at the campus since 1998, reports indicate.
Nvidia has been a beneficiary of investor excitement for artificial intelligence, with shares in the company nearly doubling this year to give it a stock market value of $2.37 trillion.
The seller, Los Angeles asset manager Preylock Holdings, paid $240 million for the site that includes office, research and data center space in 2017, according to CoStar Group data. The former landlord started marketing the campus for sale earlier this year after receiving an unsolicited bid from a foreign investor, according to reports.
Nvidia's purchase marks the priciest office purchase for the South Bay Area since 2018, when the Stanford Research Park sold for $380 million, according to CoStar data. Nvidia and Preylock did not respond to requests to comment.
Leasing volume slowed in Santa Clara last year to its lowest level in two decades, driven by a pullback from tech tenants, according to a CoStar market report.
Still, the "submarket has not witnessed the higher level of downsizing that has led to increased availability in some other submarkets in Silicon Valley," with the city's vacancy rate of 6.2% below the market average of 16%.
AI Boom
Nvidia has contributed to property demand for the region. In 2022, the company completed the development of 1.2 million square feet of offices across the street from its newly purchased headquarters. Its recent deal also includes the rights to build an additional 2 million square feet at the site.
Still, the company does not have an in-office mandate for its employees, reports indicate.
The chipmaker joins several other tech companies that have purchased or developed their own headquarters in Silicon Valley, with titans in the industry like Apple and Meta owning their campuses in Cupertino and Menlo Park.
Nvidia's revenue more than tripled during the first quarter of 2024 to a record $22 billion, driven by growing demand for artificial intelligence.
Investments in AI rose in 2023 while funding for some other tech sectors took a hit, according to a report from market analytics site Lightcast. Job growth for the industry grew sixfold in 2023, the study indicates.
“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations,” Nvidia Founder and CEO Jensen Huang said in a February statement following the release of the firm's first-quarter financial results.