Nvidia's credit default swap spreads saw a notable increase, indicating a jump in perceived credit risk, following recent reports of its potential involvement in backing a massive data center project. This surge reflects investor apprehension regarding the company's deepening financial commitments in the AI sector, particularly its reported $250 billion guarantee for OpenAI's lease on a 10-gigawatt facility in Ohio. The strategic shift sees Nvidia not just supplying chips but also playing a crucial role in financing large-scale AI infrastructure.
The proposed deal involves Nvidia providing guarantees to help OpenAI secure more favorable credit terms for leasing and construction. The total value of these guarantees could reach $250 billion, according to reports. Additionally, separate negotiations are underway for a $350 billion financing package specifically for the purchase of chips necessary to operate the facility. This complex financial arrangement highlights a growing trend of "circular deals" within the AI industry, where major players like Nvidia and OpenAI engage in significant investments and purchases from each other, blurring traditional supplier-customer relationships.
This move comes amidst Nvidia's broader expansion into financing and infrastructure development. The company recently announced a $1 billion investment in South Korean firm Naver for an AI data center and a $500 billion strategic alliance with SK Group, including long-term memory chip supplies from SK Hynix and a 2-gigawatt cloud initiative from SK Telecom. While these investments aim to secure Nvidia's foothold in key AI markets and expand its business beyond core chip manufacturing, they also introduce new financial complexities and potential risks, as reflected in the credit default swap market reaction. The Ohio project, developed by a SoftBank energy division subsidiary, is reportedly controlled by the U.S. government with Japanese funding, and accessibility is being overseen by U.S. Secretary of Commerce Howard Lutnick, with other companies like Anthropic, Microsoft, and Google also showing interest.
