Nvidia’s role as lender and guarantor for the AI buildout is facing its first major stress test as credit markets tighten around its data center partners.
By the numbers: As of its July filing, Nvidia carried $36 billion in off-balance-sheet AI cloud agreements for neoclouds, plus a guarantee on up to $105 billion for chips, land and power at a proposed 10 gigawatt OpenAI data center in Ohio. It also signed as tenant for $20 billion in future data center leases.
- CoreWeave, Nebius and IREN, all cash-burning companies in Nvidia's portfolio, are each down at least 30% this month. The spread on CoreWeave's credit default swaps has soared past 11%.
The big picture: CEO Jensen Huang has used Nvidia’s investment grade credit rating to help customers borrow cheaply so its systems reach more buyers. The August filing outlined over $500 billion in off-balance-sheet commitments, a majority maturing through fiscal 2029.
Yes, but: For the vast majority of these deals Nvidia pays out only if project participants default. The company declined to comment for the CNBC story.
- "If the demand for compute doesn’t meet these really super lofty expectations, we’re going to have a problem," said David Trainer, founder and CEO of research firm New Constructs.
The other side: Huang told CNBC on Thursday that demand for neoclouds is off the charts. "What is missing in the middle is the working capital to fuel that growth," he said in Berlin, pointing to a scarcity of capital across AI sectors.
Between the lines: Cash is the buffer. Nvidia generated $70 billion in free cash flow in the first half of this year, against just over $4 billion at AMD, and its equity portfolio was worth $99 billion as of the second quarter.
Why it matters: Nvidia closed a third straight down week and is off 7.6% in October, on pace for its worst month since November of last year. A $5 trillion company underwriting its own customers puts chip demand and credit risk on the same balance sheet.
