Nvidia is lending a hand to its customers, and now that is being tested

Nvidia, the company that makes the chips behind most AI tools, has also become a financial backer of its own customers. Now that strategy is being tested. Shares of three AI cloud companies Nvidia has backed are down at least 30% this month, and Nvidia's own stock is down 7.6% in October, on pace for its worst month since November of last year.

What Nvidia is doing

Nvidia does more than sell chips. It invests in AI companies and helps them take out loans so they can buy its systems. It uses its strong credit rating to back big projects, so the builders can borrow at lower interest rates.

• $36 billion in backstops (promises to cover debts) for cloud partners, as of its July filing
• A guarantee on up to $105 billion for a proposed OpenAI data center in Ohio
• $20 billion in future data center leases, to be handed to other parties later
• A $500 billion financing push with six asset managers, announced in August

For most of these deals, Nvidia pays only if the other parties default, meaning they fail to repay.

Where the pressure is showing

The partners in question are called neoclouds. These are newer companies that rent out AI computing power. CoreWeave, Nebius and IREN all burn through cash, and all three are in Nvidia's portfolio. The cost of insuring against a CoreWeave default has jumped, with that price passing 11%.

Other Nvidia-backed firms have hit trouble too. Australia's Firmus withdrew its plan to go public this month. Nscale in the U.K. and SB Energy filed to go public in September but have shared no updates in weeks.

What Nvidia and its critics say

CEO Jensen Huang told CNBC that demand for neoclouds is "off the charts." He said the missing piece is working capital, because there is a scarcity of capital. Nvidia has plenty of its own. It generated $70 billion in free cash flow in the first half of this year and has a market value of $5 trillion.

Critics see a risk. "If the demand for compute doesn't meet these really super lofty expectations, we're going to have a problem," said David Trainer of research firm New Constructs. Nvidia declined to comment for the story.

Why it matters to you

Nvidia is one of the largest companies in the stock market, so a hit to it can reach stock prices and retirement funds that hold its shares. It also sits at the center of the AI buildout behind many of the tools people use. If money for that buildout dries up, it could affect how fast those tools grow.

What is not known yet

The article does not say how many of these deals could actually go bad. Nvidia's filing shows over $500 billion in off-balance-sheet commitments, most maturing through fiscal 2029. Whether demand holds up is the open question.