Nvidia Weighs $250B Backstop for Ohio Data Center
Nvidia Weighs $250B Backstop for Ohio Data Center
The News
Nvidia is in talks to provide roughly $250 billion in financing guarantees for OpenAI as part of a massive data center project in southern Ohio, The Wall Street Journal reported, citing people familiar with the matter.
The guarantees would help OpenAI lease a 10-gigawatt campus in Pike County that SoftBank's energy subsidiary is developing. The full project, including the chips inside it, is expected to cost more than $500 billion.
Nothing is signed. This is a reported negotiation — Nvidia, OpenAI and the Commerce Department did not respond to Reuters' requests for comment on the report.
What a Nvidia "Guarantee" Means
Nvidia would not be writing OpenAI a $250 billion check. A guarantee is a backstop: Nvidia's credit standing behind someone else's lease or loan, so lenders and landlords accept a customer they might otherwise consider too risky.
That matters here because OpenAI, valued at $852 billion, is one of the most valuable private companies in the world — and still unprofitable, which raises questions about its ability to fund the multibillion-dollar infrastructure commitments it has already signed.
For OpenAI, a deal would be its first real step toward controlling its own infrastructure instead of renting from Microsoft, Amazon and Oracle. For Nvidia, it locks in demand for its chips for years.
It fits a pattern Nvidia set out publicly this week. The company said Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR are willing to commit up to $500 billion to build AI data centers — and Nvidia agreed to guarantee, with its own money, that chips used as loan collateral hold their value, covering up to 25% of any shortfall if a borrower defaults and the GPUs sell for less than the books say, TechCrunch reported.
Who Controls the Power
The electricity for the Ohio project is controlled by the U.S. government and funded separately by Japan under a recent trade deal, with Commerce Secretary Howard Lutnick involved in deciding who gets access, the Journal reported.
OpenAI has been in advanced talks for several weeks to lease the site and is among the companies showing the strongest interest. Anthropic, Microsoft and Google have also spoken to Lutnick in recent weeks. Lutnick has previously told the Columbus Dispatch he is confident the project moves forward, citing the job creation expected for the region.
Timeline
SoftBank chairman and CEO Masayoshi Son breaks ground at the former Portsmouth Gaseous Diffusion Plant in Piketon on a proposed $33 billion, 9.2-gigawatt power plant, calling it "bigger than any power plant, I think, in the world … at least in the U.S. for sure." He describes at least $500 billion of investment "in one campus," "in one shot."
The Wall Street Journal reports Nvidia is in talks to guarantee roughly $250 billion in financing for OpenAI to lease the site. Reuters says it could not immediately verify the report.
Nvidia unveils the $500 billion third-party financing push with six Wall Street asset managers. Bond markets react badly enough that CEO Jensen Huang goes on X and business television to explain the limits on Nvidia's exposure.
CNBC reports the AI infrastructure boom is increasingly funded by bonds, leases and private capital, with leveraged investors adding another layer of market risk.
Reactions
"Is this circular financing?" Huang wrote on X of the $500 billion plan. "This initiative is designed to address that concern. We are bringing independent, long-term institutional capital into the AI infrastructure market."
Skeptics see a company on every side of the same trade. Business professor Rob Lalka told Business Insider that in this AI gold rush Nvidia is selling picks, investing in mines, and bankrolling prospectors.
Analysts have drawn a comparison to Lucent Technologies, the telecom equipment maker that rose and crashed with the dotcom bubble after lending customers money to buy its gear. TechCrunch notes the structures differ: Nvidia is getting outside investors to shoulder most of the capital and risk while protecting only a portion of its chips' future value. The risk it does carry is what financiers call "wrong way" risk — Nvidia's obligations grow precisely when AI demand weakens and its revenue is already squeezed.
The Local Problem
The Frank reported this week that towns across the country are moving to block data centers — zoning fights, moratoriums and referendums over power draw, water use and noise. Ohio is not an exception to that trend; the Piketon-area campus and the $33 billion gas-fired plant meant to feed it have drawn both critics and supporters since the groundbreaking.
A 10-gigawatt campus is the largest version of the thing those local fights are about. The financing question — who guarantees the money — gets settled in New York. The siting question gets settled in county meeting rooms.
What's Next
Watch for confirmation or denial from Nvidia and OpenAI, a signed lease on the Pike County site, and Lutnick's decision on who gets the government-controlled power.
Also watch the credit markets: if lenders keep repricing Nvidia's risk, the guarantee structure that makes this deal possible gets more expensive.
More
Suggested reader poll: Should a chipmaker be allowed to guarantee the loans that buy its own chips?
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