Nvidia is considering becoming the main financial driver of one of the largest AI infrastructure projects to date. And according to has advanced The Wall Street Journal, Jensen Huang’s company is negotiating to offer a guarantee of about $250 billion so that OpenAI can rent a colossal data center campus in Ohio, USA. All, without the agreement being closed yet.
What exactly is the agreement about?. Nvidia’s endorsement would not be direct money for OpenAI, but rather a financial guarantee. According to the media, it would help those responsible for ChatGPT can lease a 10-gigawatt project that SoftBank’s energy subsidiary, SB Energy, is building in southern Ohio.
With the backing of Nvidia, this project could obtain debt financing on better terms, something especially relevant because OpenAI, being a private company that has not yet made a profit, does not have sufficient credit rating to be able to invest in this type of project on its own.
Why is such a guarantee necessary?. Without the backing of a creditworthy partner, it would be much more expensive for SoftBank to borrow the money needed to build such infrastructure. Just like share WSJ, by putting its signature as a guarantee, Nvidia reduces the risk that lenders assume and makes the operation cheaper. In the jargon of the sector this is called “credit wrapper”, and it is not the first time it has happened. In fact, Google has endorsed Anthropic data centers before, in part to boost sales of its own AI chips, according to collect the same medium.
Figures that give vertigo. The entire project, also counting the chips that will go inside the facilities, could exceed $500 billion, which would make it the largest data center announced to date. The guarantee of 250,000 million would cover the rent and construction debt, but not the semiconductors. For this, Nvidia is separately negotiating another financing for the purchase of chips by OpenAI, which could reach an additional $350 billion, according to share from WSJ.
The role of the Government of USA. The project’s electricity is under government control and is financed, in part, thanks to a recent trade agreement with Japan, which committed to invest $33 billion in a natural gas plant in the same area, as remember the WSJ. Secretary of Commerce Howard Lutnick is directly involved in deciding who has access to that energy.
The chosen site is, in addition, a former uranium enrichment center already closed, about 80 kilometers south of Columbus, which would allow us to avoid a good part of the problems of permits and opposition from residents around the area that other similar projects in the country suffer.
She is not the only one interested. OpenAI has been in talks for weeks to take over that space and it is, according to the WSJ, the candidate that has shown the most interest. But she’s not alone, as Anthropic, Microsoft and Google have also spoken to Lutnick about the same issue in recent weeks. Getting energy power has become the big bottleneck for all companies training large-scale AI models.
What does each party gain?. For OpenAI, this agreement would represent a change of model, as it would be its first data center as a direct tenant, a step towards controlling part of its own infrastructure instead of depending exclusively on renting capacity from Microsoft, Amazon and Oracle, as it does now. The company has already raised its computing spending forecast until 2030 to $750 billion, compared to the $600 billion it managed at the beginning of the year. For Nvidia, with a market value close to $5 billion, endorsing these types of projects ensures future demand for its chips for years.
The shadow of circular financing. This type of operation, in which large technology companies finance infrastructure that later generates business for themselves, worries a large part of the market. Gary Tan, portfolio manager at Allspring Global Investments, counted to Bloomberg that “although Nvidia’s investments and partnerships bolster confidence in long-term AI builds, investors remain concerned about circular financing.”
Nvidia itself has warned in its latest annual report that these types of agreements could reduce its short-term liquidity and increase its exposure to the credit risk of its clients.
And now what. Negotiations are still in an early phase and conditions could change or even break before anything is signed, according to quote from Bloomberg. The first phase of the project, with about 800 operational megawatts, would not be ready until 2028. So it seems that we will have to wait to find out if it ends up materializing and how exactly it does so.
Cover image | Steve Juvetson, NVIDIA
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