At the weekend, the assets of OnLive were bought by a new company backed by existing investor Lauder Partners, as a way to ensure that the company can continue to operate.
Job cuts at OnLive had led to fears that it was about to fold before the restructure was announced.
Taiwanese smartphone maker HTC invested in OnLive in February and was also one of its major partners. The company had hoped that the move would strengthen its gaming capabilities and help it meet demand for games on mobile devices.
However, in a filing to the Taiwanese stock exchange today (August 20), HTC said: "Due to lack of operating cash and an inability to raise new capital, OnLive had completed asset restructuring over the weekend.
"HTC estimates that it will need to recognise a $40 million provision for this investment loss."
Alongside HTC, other major technology companies have also invested in OnLive, including Warner Brothers, AT&T and BT, which acquired a 2.6% stake in the company.
A $40m loss will not overly concern HTC, which had sales of $3.04bn last quarter, but it does come at a difficult time for the company.
HTC recently offloaded half of its controlling stake in the Dr Dre-founded audio tech group Beats after it had not performed as expected.
The company is also facing new competition for mobile customers in China after rival Xiaomi launched the M2, a handset which has all the specs of a high-end HTC phone but with a considerably cheaper price.