The ‘bank of AI’: how Nvidia helps its clients keep the boom going
Originally published in October, an in depth look at Nvidia, as Jensen Huang, the man behind the tech giant, is now at the centre of a Chinese spy scandal
Nvidia is one of the most important companies operating today. The American tech giant designs and provides the chips that power a large proportion of the world’s artificial intelligence systems.
Many of the biggest AI firms — such as Anthropic, OpenAI, Alphabet and Microsoft — depend on it, even as they try to design their own chips. This has made Nvidia incredibly rich: its market value is about $5.24trn (£3.93trn).
However, many of Nvidia’s customers are struggling to afford its products and the required infrastructure. As a result, the company is using its spare billions to support them, be it through investments, guarantees, partnerships or licensing agreements. It has been described as the “central bank of AI”.
This spending spree has led to fears of circular financing, in which a company gives money to a customer and enables it to buy more of its products than it could otherwise afford.
In October, the International Monetary Fund warned heavy spending on AI could trigger a market crash that threatens global financial stability. “The consequences of an AI correction could be global,” it said.
Athanasios Vamvakidis, a deputy director at the fund, added: “The exposure of the rest of the world to US assets, particularly AI, is the highest it has ever been.”
Worries about the AI bubble triggered a sell-off in tech stocks in October, when Nvidia shares fell more than 6 per cent.
Here we break down some of Nvidia’s deals.
CoreWeave
This cloud-computing company leases out large data centres stuffed with powerful graphics processing units (GPUs) from Nvidia. It rents this computing capacity to customers such as Microsoft, Meta and OpenAI.
To buy Nvidia chips, CoreWeave has to take on a lot of high-interest debt, mostly in the form of high-yield bonds. In recent weeks, investors have become jittery about Coreweave’s financial position. Earlier in October, its shares fell by more than 20 per cent and the cost of protecting its debt against default rose to a record high.
To support CoreWeave, Nvidia has been buying its shares and helping it to purchase land and power for its data centres. Nvidia has also agreed to buy any unsold cloud capacity from CoreWeave until 2032.
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