US chipmaker Nvidia is working on a fresh round of AI deals worth more than $750 billion, according to reports. These transactions have left many AI companies increasingly intertwined, potentially exposing the sector to systemic shocks. Skeptics have warned that these deals are artificially inflating demand and valuations across the industry.
A central point of concern involves discussions regarding a $250 billion backstop for OpenAI to help finance a planned 10-gigawatt AI data center campus in Ohio. According to Bloomberg, the potential Nvidia guarantee would be one of the largest of its kind for the chipmaker. The proposed guarantee would support the project's lease and construction debt, not the Nvidia chips deployed inside the facility. Nvidia declined to comment on the report.
These discussions follow significant existing financial ties between the companies. Nvidia invested $30 billion in OpenAI in March. Additionally, Nvidia invested $10 billion in Anthropic last year. OpenAI was valued at more than $800 billion by private investors in March. The company confidentially filed for an IPO in June but has not announced a timeline.
Market Reaction and Credit Risks
Investor anxiety was reflected in trading activity on Monday. Nvidia shares fell more than 4 percent, with other reports indicating the stock fell nearly 5 percent. Apple surpassed Nvidia as the world's most valuable public company. Broader tech and semiconductor stocks also declined: US chipmaker AMD dropped more than 5 percent, US memory maker Micron dropped more than 2 percent, and South Korean memory maker SK Hynix dropped more than 7 percent.
Financial instruments tracking risk also moved sharply. Bloomberg noted that the price of protecting Nvidia's debt against default for five years rose by the most on record on Monday. Nvidia's rising credit default swaps are the talk of Wall Street amid circular financing fears.
Dot-Com Comparisons
CNBC's Jim Cramer said the circular financing arrangement reminded him of the late 1990s dot-com bubble. He stated, 'I lived through 2000. I don't want the sequel.' Cramer emphasized a lesson from that era: 'What we learned in 2000 is that you don't lend to companies who buy your goods.'
Cramer outlined the conditional nature of the risk. He said, 'If the buyer, in this case, OpenAI, can actually afford to pay for these chips, perhaps because it comes public... then Nvidia's in terrific shape.' However, he added, 'If the buyer can't pay, well, that's a different story.' He noted that there are so many companies counting on the data center for their earnings.
The commentator warned that if the market decides it doesn't want to fund any more data centers, and the companies themselves don't have the money, or they don't get paid, then we're back in 2000. He said that history shows investors can quickly lose confidence when suppliers become too reliant on customers whose massive spending depends on continued access to capital.
Despite the warnings, Cramer said he still views Nvidia as an exceptionally strong company. He noted that the risks extend well beyond Nvidia because a growing number of companies now depend on continued investment in AI infrastructure. He added that strong balance sheets alone have not always been enough to shield companies from the fallout when customers become overextended.
Industry Context and Defense
Nvidia has backed multiple neocloud providers that rent Nvidia-powered computing capacity to customers. The chipmaker has said those investments support the growth of the AI ecosystem while offering attractive long-term returns. Mike Dorrell, chairman CEO and co-founder of Stonepeak, dismissed concerns about the financing structures.
Broader market dynamics continue to influence sentiment. Last week, US tech giant Alphabet shares plummeted after it announced it would raise its capital spending outlook as it builds out AI infrastructure. Investors are awaiting earnings this week from US companies Microsoft, Amazon, and Meta, all expected to announce further increases in AI-related spending.
Other geopolitical and competitive factors also played a role in recent market movements. The Information reported that a Chinese state-backed company began mass-producing a key piece of chipmaking equipment, sparking a sell-off in Dutch chipmaking equipment maker ASML shares. Meanwhile, US chipmaker Nvidia announced a strategic collaboration with the South Korean conglomerate SK Group on Friday for a $500 billion-plus initiative spanning AI factories and next-generation memory.