AI: Nvidia the 'Kingmaker', Now 'Uber AI Investor & Banker'. AI-RTZ #1171

Nvidia keeps writing checks that grow with its global AI Infrastructure market share. And this AI Tech Wave keeps running on them.

Bloomberg reports a fresh round of Nvidia AI deals worth more than $750 billion, and the word that follows many of them: ‘circular.’ I’ve referred to them as ‘Boomerang’ deals.

“Nvidia Corp. is working on a fresh round of AI deals worth more than $750 billion, accelerating investments that skeptics have warned are artificially inflating demand and valuations across the industry.”

The investments are up and down the AI Tech Stack.

A partnership with Korea’s SK Group worth over 500 billion dollars in two-way business, including 2 gigawatts of AI factories and co-designing future HBM memory with SK hynix.

Talks to backstop up to 250 billion dollars so OpenAI can lease a 10 gigawatt, 500 billion dollar SoftBank data center hub in Ohio. Plus discussions to finance 350 billion dollars of OpenAI chip purchases.

Add 5 billion dollars into Ilya Sutskever’s Safe Superintelligence, a billion into Korea’s Naver. Over 540 billion dollars of such deals announced this year, before the OpenAI piece.

The skeptics are being vocal on this front. An example is Michael Burry of ‘Big Short’ fame.

Nvidia’s stock fell 5% on the news, and it handed the most valuable company crown back to Apple that day. The ebbs and flows continue

Jensen Huang remains focused on the large AI opportunity he sees ahead.

“It’s a small percentage of the amount of money that they ultimately have to go raise… The idea that it is circular is, it’s ridiculous.”

Longtime readers know my frame here. Nvidia is the AI ‘Kingmaker’, investing up and down the stack in the companies that buy and build on its computing.

And the relationships run ‘Frenemies’ in both directions, as I have written. Its top customers build competing chips. The AI Coding players compete and partner at once. Everyone in this wave does both.

So the deals are not new behavior. The revenue share deals with customers, the ‘Boomerang’ deals, the CoreWeave rocket fuel. The checkbook has been part of the product for years. What is new is the scale.

Here is the mechanism that I think matters most, and it gets missed in the circularity debate.

I went into this on Ram Ahluwalia’s Non-Consensus Investing podcast this week, from the 1:15:26 mark. The backstop makes Nvidia something like a lender of last resort for the AI build-out.

The 250 billion dollar guarantee is what lets creditors lend against leases to an unlisted, unprofitable OpenAI. The leases get signed. The compute gets deployed. The usage gets billed.

Circular financing, in other words, becomes a pathway to recognized revenues. For OpenAI on its way to the mega-AI IPO, and for Nvidia across that trillion-dollar pipeline. Bookings become buildings become billings.

Why does Jensen do it? Because he has been paranoid about missing the opportunity since long before this wave crested. And because he can.

Nvidia is the pickaxes and shovels vendor of the wave. Jensen has publicly pointed to at least a trillion dollars of revenue visibility through 2027, across Blackwell and Vera Rubin. Feynman is next on the roadmap.

Cash flows like that fund a lot of kingmaking.

The risks are real, and worth stating plainly. Per Axios, if Nvidia finances more capacity than the market absorbs, it faces weaker pricing, slower orders and losses on the guarantees.

And its own customers keep building chips, the ‘Frenemies’ pattern again. Anthropic began hiring an in-house chip design team this week, the latest in the series, aimed squarely at inference costs for Claude.

Everyone views inference as Nvidia’s weak flank. Jensen is acutely focused there. The ‘Vera’ CPU half of the Vera Rubin architecture highlights exactly that focus.

Even Elon, while building his own chips with Samsung, Terafab and beyond, declared this week that Nvidia’s Vera Rubin architecture is the best there is. Those are parallel efforts, not replacements.

I covered the ‘AI Bubble’ concerns around Nvidia last fall, and they deserve the scrutiny they are getting.

Note the peers are also running the same playbook. Google is backstopping Anthropic’s data center leases, roughly a 35 billion dollar loan’s worth.

My take. This is pragmatic vendor financing at unprecedented scale, by the one company with the cash flows and the market position to do it. The Kingmaker is now also the mega investor and banker backer.

The test from here is less about the circularity of the deals. It is whether the backstops convert into revenues that stick. At OpenAI and across the stack.

That is the pathway to watch in this AI Tech Wave. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here.)