NVIDIA Expands AI Infrastructure Financing Guarantees... Strengthening Role as 'Central Bank of AI'

NVIDIA is strengthening its financial engineering strategy beyond simple chip sales to maintain its dominance in the AI infrastructure market. CEO Jensen Huang is providing various financial supports and guarantees to customers and data center operators to create demand.

Financial Support Structure and Scale

NVIDIA is mobilizing various financial tools to reduce funding burdens for hyperscalers and Neoclouds and to stabilize chip demand.

• Data Center Guarantees: Providing a backstop of up to $105 billion for the large-scale Ohio data center project owned by SB Energy (a SoftBank subsidiary), and announcing a plan to mobilize over $500 billion in AI infrastructure investment alongside six major Wall Street financial firms.
• Guarantee Details: Composed of OpenAI-related data center guarantees ($105 billion), Wall Street partnerships (up to $125 billion), and other backstops (approx. $67 billion). Additionally, support was provided to some customers in the form of revenue compensation if targets were not met.
• Equity Investments: NVIDIA holds equity stakes in many Neoclouds and AI companies, aiming to create chip demand by encouraging the proliferation of independent AI products and companies.

Market Impact and Risks

This strategy is a measure to address the increasing trend of hyperscalers designing their own chips and the high borrowing costs faced by Neoclouds. While Alphabet issued 50-year bonds at a 5.7% interest rate, CoreWeave raised funds at nearly double that rate.

• Demand Creation vs. Demand Generation: Jay Goldberg, an analyst at Seaport Research Partners, assessed that NVIDIA is walking a tightrope on the boundary between actual demand creation and artificial demand generation.
• Financial Exposure: Morgan Stanley estimated that NVIDIA's 'all-in' debt would increase to $200 billion by early 2029, but analyzed that the company would not be at risk until a catastrophic recession occurs. On the other hand, investors like Michael Burry, who bet on mortgage-backed securities during the 2007-09 financial crisis, are more skeptical about NVIDIA's role.
• Competition and Outlook: Bloomberg Intelligence predicted that custom chips will account for approximately 50% of the AI processor market by the late 2030s. Competitors are also utilizing similar financial structures, such as Google and Broadcom forming a financial consortium to guarantee shortfalls for Anthropic's chip purchases. Investors should note that the more NVIDIA finances the boom, the more burden it may bear during a downturn.