Nvidia's AI financing model faces pressure as neocloud partners see stock declines
Tightening credit markets are testing Nvidia's strategy of backing AI cloud developers with off-balance-sheet guarantees and equity stakes, as several neocloud companies experience sharp share drops.
Nvidia is confronting its first major stress test as credit conditions tighten for the AI-focused cloud operators it backs. The chipmaker, which has expanded from selling graphics processors to providing financing and guarantees for AI infrastructure projects, holds $36 billion in off-balance-sheet cloud agreements and a $105 billion guarantee for a proposed 10-gigawatt OpenAI data center in Ohio, according to its latest quarterly filing.
The market has responded with volatility. Shares of neoclouds CoreWeave, Nebius and IREN have each fallen more than 30 % this month, and CoreWeave’s credit-default-swap spread has risen above 11 %, reflecting heightened default risk. Nvidia’s involvement includes equity stakes and commitments to purchase up to $6.3 billion of CoreWeave’s compute capacity if needed.
"If the demand for compute doesn't meet these really super lofty expectations, we're going to have a problem," said David Trainer, founder and CEO of financial-research firm New Constructs.
Nvidia declined to comment on the situation. CEO Jensen Huang, speaking at the company's GTC conference in Berlin, said demand for AI-focused cloud services remains "off the charts" but acknowledged a shortage of working capital to sustain growth.
"What is missing in the middle is the working capital to fuel that growth," Huang told CNBC.
The company’s broader financing push includes a partnership with six large asset managers to offer up to $125 billion in residual-value guarantees on GPU loans, and equity investments in private-equity funds such as Brookfield’s AI Infrastructure Partners Fund. Nvidia’s portfolio of AI-related investments was valued at $99 billion in the second quarter.
Analysts note that while Nvidia’s cash generation—$70 billion in free cash flow in the first half of the year—provides a competitive edge, the scale of its off-balance-sheet commitments, projected at over $500 billion through fiscal 2029, introduces significant exposure. Moody’s has flagged the rapid growth of such guarantees as a risk factor it is monitoring closely.
Despite the challenges, Nvidia maintains that its financing support enables customers to expand compute capacity, which in turn drives demand for its GPUs and related services.