As Nvidia announced its $105 billion in financial support for one of the world's largest data centers in the latest of its circular deals lending money to customers who buy its products, the company's CEO, Jensen Huang, made a noteworthy statement intended to explain the investment.
He said that AI companies are "growing faster than their balance sheets and long term credit profiles can support." That used to be a market signal that a company should rein in its borrowing. In the AI economy, that is apparently a signal for the world's largest supplier of AI chips and wealthiest corporation to lend them the money to keep going. How this ends well for the companies, their employees, lenders, investors and the public is not explained, presumably because no one really knows. JL
Kalley Huang reports in the New York Times:
Nvidia agreed to spend as much as $105 billion to back one of the world’s largest data centers, which is being built in Ohio and will be leased to OpenAI. Nvidia’s financing for the data center, that could cost as much as $500 billion, is part of the complex dealmaking behind the A.I. boom. Using unusual arrangements with chipmakers, cloud computing providers and governments, OpenAI and Anthropic are gaining access to computing power that they could not afford themselves. Many of these deals are circular, with an A.I. start-up receiving billions of dollars from technology giants before spending those billions on the same companies to pay for chips, cloud computing and other services. Jensen Huang, Nvidia’s CEO, said that A.I. labs “are growing faster than their balance sheets and long-term credit profiles can support.”