Nvidia is significantly expanding its data center footprint by leasing an entire 1-gigawatt facility from Hut 8 in Texas. This 15-year agreement is valued at $19.6 billion, with the potential to reach $50 billion over 30 years if renewed. The facility will be subleased to emerging cloud operators and serve as an AI service hub. This deal, following earlier reports of Nvidia's payment guarantees for an OpenAI project, reignites concerns about a circular financing structure where AI chip manufacturers and their customers are deeply financially intertwined.
Separately, Meta Platforms and BlackRock have announced a $14 billion venture to develop and operate a 1-gigawatt data center campus in El Paso, Texas, with operations expected to begin in 2028. Meta will contribute land and assets worth $2.3 billion, and BlackRock will provide $4.9 billion in cash, taking an 80% ownership stake. Meta will lease computing capacity from this venture, allowing it to acquire necessary infrastructure without solely funding and owning the campus, at a time when investors are scrutinizing data center investments.
Meanwhile, OpenAI is reportedly nearing a deal to lease a data center project in Ohio valued at approximately $500 billion, with Nvidia in talks to provide a $250 billion financial backstop. This project, which could be the largest data center announced to date, also involves Anthropic, Microsoft, and Google showing interest. Analysts are questioning the sustainability of this debt-heavy investment and the broader AI sector's circular financing model, where tech giants invest in startups that then spend heavily on the giants' own chips and cloud services. If OpenAI struggles to repay its debts, it could pose financial distress for the entire AI industry, including Nvidia.
