Nvidia reignites "circular" financing concerns as it weighs OpenAI deal
Add Axios as your preferred source to
see more of our stories on Google.
Nvidia CEO Jensen Huang speaks to members of the media in Tokyo on July 16. Photo: Kiyoshi Ota/Bloomberg via Getty Images
Nvidia appears poised to tighten its ties with OpenAI as it reportedly explores a deal to backstop financing for a massive data center to power the ChatGPT maker's ambitions.
Why it matters: The potential deal underscores the swift pace of the AI economy, but it also renews concerns that the increasingly "circular" nature of AI deals could create systemic financial risks.
- Nvidia shares tumbled 4.5% in late morning trading.
The big picture: Nvidia, which is making oodles of cash, is using its financial heft to buoy its customers, who are losing oodles of cash.
- The company is weighing a plan to guarantee $250 billion for an OpenAI data center project in southern Ohio, WSJ and Bloomberg reported.
- It's also reportedly considering a separate deal to finance OpenAI's purchase of $350 billion in Nvidia chips.
These are things you can consider when your market cap is hovering around $5 trillion and your profit margin is an astonishing 75%.
- But the possibility of more circular deals — you buy from me, I invest in you, and everything's fine unless one of us has a problem, in which case both of us have a problem — soured the debt market on Monday.
- The price of credit default swaps on Nvidia bonds — which provide a version of bond-default insurance to investors — recorded their highest intraday increase since they started to actively trade in November, according to ICE Data Services figures cited by Bloomberg.
Zoom in: The Ohio data center is being developed by an arm of the Japanese tech investment firm SoftBank, which sold its Nvidia shares in late 2025.
- With Nvidia backing OpenAI, the vision is that the data center developer would be able "to raise debt at more favorable terms than it could if OpenAI had no financial backer," WSJ reports.
- The operation would be located on a decommissioned uranium enrichment site on federal land, giving the Commerce Department control over the supply of power, which will come from a new $33 billion natural gas plant pledged by Japan.
Meanwhile, Nvidia announced another deal Monday to invest in and partner with OpenAI co-founder Ilya Sutskever's new firm, Safe Superintelligence.
- The deal serves as something of a public validation for the stealthy AI startup, with Nvidia saying that it had obtained "rare access into the company's closely guarded research."
- Details of their arrangement were thin, but it will allow the startup "to increase its compute by an order of magnitude," and the companies will "collaborate on the technical advancement of NVIDIA's current and future compute platforms," according to Nvidia.
What they're saying: Reps for OpenAI and Nvidia had no immediate comment Monday on the reports of their under-discussion deals.
Madison Mills contributed reporting to this story.
