Nvidia's Latest 'Circular' Deal Might be Its Most Confusing Yet

Dow Jones35 minutes ago

Nvidia's appetite to act as banker and investor for the artificial-intelligence ecosystem seems endless. Its most recent deal is a doozy, even by the chip maker's standards.

Claude-developer Anthropic-which counts Nvidia among its investors-has signed a cloud-computing deal worth $35 billion with cloud provider Lambda-which is backed by Nvidia-according to The Wall Street Journal. However, Nvidia will hold the lease on the data center, which it has secured from infrastructure developer Hut 8.

So, an Nvidia-backed AI developer is renting computing capacity from an Nvidia-backed cloud provider, using an Nvidia-leased data center that will be filled with Nvidia's hardware.

Nvidia executives made it very clear on their most recent earnings call that they don't accept the term "circular financing" for the use of its balance sheet. But it's hard to see a better term for the chip company's role at the center of the web of AI funding.

Nvidia has been very active in making deals in recent months, taking small stakes or options to invest in all of Corning, Marvell Technology, Lumentum, Coherent, CoreWeave, Nebius, Synopsys, Nokia, and MediaTek. It also has large stakes in both Intel and SpaceX and dozens of smaller investments in private companies.

That's not necessarily a problem. In fact Barron's has repeatedly argued Nvidia is making smart use of its huge cash flows, ensuring long-term demand for its processors and putting relatively little of its own balance sheet at risk, while also benefiting from the rising value of its stakes.

Still, some more information about the financial terms of such deals wouldn't go amiss. For example, it isn't clear how much Lambda will have to pay for using the Nvidia-leased data center or if it will share a portion of the generated revenue from its Anthropic deal. Nvidia didn't immediately respond to a request for comment early Tuesday.

If Nvidia really wants to put to bed the circular financing concerns, transparency is the best solution.

Nvidia shares were down 1.1% in premarket trading.

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