Nvidia's $250B OpenAI Backstop Revives Circular Financing Fears

Nvidia shares tumbled roughly 5% Monday, sliding to around $197, after the Wall Street Journal reported the chipmaker is in talks to guarantee up to $250 billion in financing tied to OpenAI's massive data center buildout — reviving Wall Street's deepest fear about the AI trade: that it's being propped up by circular financing.

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The selloff wasn't isolated. AMD dropped roughly 8% on the same report, and the pressure spread across AI-hardware names as investors reassessed how much of the industry's spending is being backstopped by the very companies selling the chips.

What happened

According to the WSJ report, Nvidia is negotiating a guarantee for OpenAI's lease of a planned 10-gigawatt data center campus in southern Ohio being developed by SB Energy, a SoftBank subsidiary. The $250 billion figure covers the lease and construction debt for the facility itself — not the Nvidia chips that will fill it. Separately, the WSJ reported Nvidia is also discussing financing up to $350 billion of OpenAI's chip purchases. Combined with the hardware, the overall project could ultimately run past $500 billion, which would make it the largest data center buildout announced to date.

As I covered in Nvidia's Stock Fell 4.5% on the OpenAI Deal. Its Bond Market Fell Harder., this isn't the market's first brush with unease over the scale of Nvidia's commitments to OpenAI — but the $250 billion backstop figure is a materially bigger number than what triggered that earlier reaction.

Why it matters: the circular financing problem

The structure under discussion has Nvidia effectively guaranteeing the debt behind a data center that will be filled with Nvidia GPUs, purchased by a customer whose buildout Nvidia is also helping finance. Investors describe this as vendor financing at a historic scale: Nvidia's revenue and OpenAI's spending capacity become intertwined, rather than OpenAI funding the buildout purely from its own balance sheet or organic cash flow.

Michael Burry, the investor known for his bet against subprime mortgages before the 2008 crash, weighed in publicly on the arrangement, characterizing it as Nvidia essentially guaranteeing a customer's spending on its own chips — summed up in his phrase "around and around we go."

The concern isn't that the deal is illegal or even unusual for infrastructure financing — it's that stacking enough of these arrangements across the AI industry makes it harder to tell how much real, independent demand exists versus demand manufactured by supplier-backed guarantees.

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Who and what is affected

• Nvidia (NVDA) — fell about 5% to roughly $197 on the report, taking on direct exposure as the guarantor of OpenAI's financing.
• AMD — dropped about 8%, reflecting broader concern about AI-hardware valuations rather than a direct link to this specific deal.
• OpenAI and SoftBank's SB Energy — the counterparties on the Ohio data center lease that the guarantee is meant to support.
• The broader AI-hardware supply chain — any company whose growth story depends on continued mega-scale data center commitments is now facing renewed scrutiny of how those commitments are actually funded.

What to watch next

The key follow-through items are whether Nvidia and OpenAI formally confirm the terms of the guarantee, how ratings agencies and bond markets react to Nvidia taking on this scale of contingent liability, and whether other AI infrastructure players disclose similar backstop arrangements that had previously gone unremarked. Any official confirmation, denial, or restructuring of the deal's terms would likely move the stock again.

Investors should also watch whether the reaction extends into Nvidia's credit default swap pricing and corporate bond spreads, since balance-sheet-level guarantees of this size are typically where debt markets react before or alongside equity markets.

This is not financial advice — always do your own research before making investment decisions.

The takeaway: a $250 billion guarantee doesn't necessarily mean the underlying AI demand is fake — but it does mean the market can no longer take Nvidia's growth numbers at face value without asking how much of that demand it's financing itself. Until the terms are confirmed and the balance-sheet exposure is clear, expect continued volatility around any headline that touches Nvidia-OpenAI financing.