Nvidia has pledged up to $105 billion in residual value guarantees to help finance OpenAI's new Ohio data center, a deal Wall Street calls too circular for comfort. A separate, quieter move — Nvidia's reported $12.9 billion acquisition of Hugging Face — may matter more for the chipmaker's long-term position.
Nvidia backs OpenAI's Ohio buildout with $105 billion in guarantees
SoftBank's SB Energy plans to build a data center at the PORTS-Pike Technology Campus in Pike County, Ohio, and lease it to OpenAI. The initial build-out covers 4.25 gigawatts of capacity, with an option for another 3.75 gigawatts, and Nvidia will be the exclusive compute supplier once capacity comes online in 2028. According to an 8-K filing in late August, Nvidia entered residual value guarantees worth up to $105 billion to help finance the project.
The guarantee follows a February funding round in which OpenAI raised $110 billion at a $730 billion pre-money valuation. During that round, SoftBank and Nvidia each invested $30 billion, while Amazon committed $50 billion.
Wall Street calls the financing arrangement too circular
Nvidia supplies OpenAI the GPUs it needs to train models, but OpenAI is also burning through cash. As a result, Nvidia is now financing the very infrastructure OpenAI will use to buy more of Nvidia's chips. Some on Wall Street see the mechanics as too circular.
Nvidia CEO Jensen Huang and CFO Colette Kress addressed the concern on the company's fiscal 2027 second-quarter earnings call. Huang described the arrangement as a way to lock in demand for Nvidia compute, while Kress argued the downside risk is limited because demand from frontier labs is strong. According to The Motley Fool: "equity returns on our invested capital will be excellent", Kress said.
A reported $12.9 billion Hugging Face deal draws less attention
Nvidia is also reportedly acquiring Hugging Face for $12.9 billion, a platform where developers publish and share open-source AI models, similar to how programmers share code on GitHub.
Why the Hugging Face deal may matter more
The OpenAI guarantee ties Nvidia to one enormous customer at a single campus that hasn't been built yet, and it deepens the chipmaker's customer concentration risk since OpenAI is among the Nvidia customers exploring custom silicon. Hugging Face works differently: if Nvidia owns the platform where open-source models are most commonly posted and discovered, it gains visibility into which models are actually shipping, then can tune its hardware and software around that usage. The open-source world is already largely built on Nvidia's architecture. Separately, Nvidia's tight integration between its chip architectures and CUDA, its software layer, creates a lock-in with developers.
Source: The Motley Fool
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