Nvidia to provide US$105 bn guarantee for data centre

Nvidia has committed up to US$105 billion to assist OpenAI in leasing a massive data center under development in Ohio by SoftBank-owned SB Energy, marking one of the company's largest infrastructure financing commitments. In addition, Nvidia plans to invest US$1.5 billion in SB Energy, following a previous US$1 billion investment from OpenAI and SoftBank for expanding data center infrastructure.

This move highlights Nvidia's strategy of financing infrastructure built around its chips, which drives demand but has raised concerns about circular funding flows between the chipmaker and its customers.

The latest deal comes after Nvidia partnered with six major financial institutions, including BlackRock, to launch financing platforms targeting over US$500 billion in third-party funding for AI infrastructure. Nvidia's CEO, Jensen Huang, emphasized that the new agreement is not circular financing and that the company is leveraging its scale and long-term visibility to support OpenAI.

Nvidia will be the exclusive chip provider for the facility in Pike County, Ohio, which is expected to have a total capacity of up to 8 gigawatts, with the first 800 megawatts anticipated to become operational in 2028.

The financing structure remains undefined and is anticipated to include equity, potentially raised through an SB Energy IPO, as well as direct investment from Softbank. Once the equity amount is determined, there will be a debt portion comprising project finance loans and possibly public debt such as bonds. Nvidia's guarantee covers a portion of the lease and power payments, along with a commitment to maintain the site's minimum value, rather than the full cost of the project or all of OpenAI's obligations.

The company plans to secure prime sites where its chips can operate for multiple generations in the future.

Critics argue that the continuous stream of AI deals may create a perception of circular financing, but experts believe that the limited number of players in the field makes such financing a necessary part of the industry. Danni Hewson, head of financial analysis at AJ Bell, notes that the true test of these investments will be their ability to generate decent returns for all stakeholders involved, a matter that can only be determined in the future.

Huang estimates that the Ohio site, initially capable of delivering 4.25 gigawatts of computing power, could contribute up to US$200 billion to Nvidia's revenue. If the company expands the site by an additional 3.75 gigawatts by 2030, it could generate up to US$600 billion in revenue.