Nvidia paused its revenue-sharing deals with AI cloud firms over antitrust fears

Nvidia has temporarily halted some revenue-sharing agreements with AI cloud companies, according to a report by the Wall Street Journal. This pause comes after Nvidia announced a new financing initiative aimed at providing credit support to AI cloud firms in exchange for a portion of their revenue, citing sources familiar with the matter.

The chip company paused the program last week but maintains that the innovative business model for accessing compute resources within the fast-growing AI ecosystem remains intact and continues to evolve due to high demand, as per an Nvidia spokesperson.

The initiative, introduced less than two months ago, sought to alleviate financing needs of small AI cloud firms by allowing them to lease Nvidia's compute capacity. In return, Nvidia would earn revenue from the sale of the hardware and a share of its customers' cloud revenues. This model was designed to guarantee a buyer for Nvidia's products, making it simpler for these firms to obtain capital for purchasing Nvidia's AI chips.

Nvidia had forecasted the potential for the model to generate billions in revenue over the medium- to long-term.

However, recent investor scrutiny has grown as Nvidia increasingly reinvests funds back into the AI ecosystem, raising concerns over the possibility of "circular deals" that could artificially boost demand. In August, Nvidia facilitated a US$500 billion financing round from major US financial institutions for its customers, and also guaranteed up to US$105 billion to aid OpenAI in leasing a substantial data center.

The Wall Street Journal reported that some Nvidia employees had voiced concerns to both existing and potential customers about the initiative potentially attracting antitrust scrutiny due to Nvidia's control over how its customers operate. Early on, Nvidia faced criticism from some potential partners for the degree of control it sought, including restricting partners to renting its chips to approved clients and preferring distribution among multiple smaller firms rather than a single large customer.

Despite the pause, Nvidia has indicated that the program may be revamped or integrated into another initiative in the future.