Nvidia has agreed to provide a guarantee of up to US$105 billion to help OpenAI lease a sprawling data centre in Ohio being developed by SoftBank-owned SB Energy, in one of the chipmaker's largest infrastructure financing commitments.

The Jensen Huang-led firm said on Monday it will also invest US$1.5 billion in SB Energy, months after a US$1 billion investment from OpenAI and SoftBank to expand data centre infrastructure.

The new deal is the latest example of Nvidia financing the infrastructure built around its chips, a strategy that helps drive demand but has also raised questions about circular funding flows between the chipmaker and its customers.

Last week, scrutiny of such funding deepened after Nvidia partnered with six major financial institutions including BlackRock to launch financing platforms targeting more than US$500 billion in third-party funding for AI infrastructure.

Huang said the new deal was not circular financing and that Nvidia is using "its scale and long-term visibility" to help.

"We are securing long-lived infrastructure for Nvidia compute so OpenAI can deploy the most productive AI factories that can be upgraded repeatedly with each new generation delivering more intelligence and better economics," Huang said.

The company will be the exclusive chip provider for the facility in Pike County, Ohio, which will have a total capacity of as much as 8 gigawatts, with the first 800 megawatts expected to come online in 2028. OpenAI is leasing the site for 20 years.

The financing structure is not yet defined and will include equity, people with knowledge of the matter said. The equity may include capital raised by a potential SB Energy IPO and Softbank direct investment, they said.

After the total equity amount is defined, there will be a debt portion that will probably include project finance loans and potentially public debt such as bonds, the people said, asking for anonymity to disclose private discussions.

Land and power are increasingly becoming a hurdle for data centres due to the ageing and strained US grid and growing opposition to new construction from communities worried about higher electricity prices as well as potential water wastage.

Nvidia said its guarantee covers a portion of the lease and power payments, as well as a commitment to ensure the site retains a minimum value, rather than the full cost of the project or all of OpenAI's obligations.

OpenAI will pay the rent, but if it defaults, Nvidia will cover the gap between that guaranteed minimum value and whatever the owner can recoup by re-leasing or selling the site.

Nvidia said it plans to selectively lock up prime sites where its chips can run for multiple generations in the future.

"Investors are right to be worried about what seems to be a never-ending loop of AI deals but realistically the field of players isn't all that vast and there was always going to be a degree of circular financing," said Danni Hewson, head of financial analysis at AJ Bell.

"The biggest test is whether these investments ultimately generate decent returns for all those laying out cash and that's something that can only be figured out further down the line."

Huang said the site, which would have an initial capacity of 4.25 gigawatts, could contribute as much as US$200 billion to Nvidia's revenue. One gigawatt of computing power is enough electricity to power roughly 750,000 US homes on average.

Overall, Nvidia could make US$600 billion in revenue from OpenAI by 2030 by selling it 16 gigawatts of computing power, including an expansion of the Ohio site by 3.75 gigawatts. (Reuters)



Edited by Cecil Wong