According to reporting by the Wall Street Journal citing sources, Nvidia has reworked the deal financing OpenAI's data centre campus in Ohio. Under the newly proposed terms the chipmaker would initially backstop only half of the planned $250 billion.

What the deal did

The "backstop" here is a credit guarantee. A data centre project borrows from banks and investors; the lender's risk is the possibility that the project cannot repay. Nvidia's guarantee absorbs that risk — if the project cannot pay, Nvidia does.

That is what lowers the cost of borrowing and makes the project possible. With Nvidia's balance sheet standing behind it, the lender calculates risk by looking at Nvidia rather than at the project.

The scale

The project's capacity is 10 gigawatts. That figure corresponds less to a data centre than to national-scale energy infrastructure; a large nuclear plant is typically around 1 gigawatt.

A $250 billion guarantee sits at the same scale. Measured against Nvidia's own market value, it is an extraordinarily large commitment to a single customer.

Why it was halved

The reporting gives no stated reason for the change, but there are two readings.

The first is risk management: committing to a single customer on this scale ties that customer's success to Nvidia's balance sheet. Staging the guarantee means not committing to the whole before seeing results from the first phase.

The second is the demand side: if the guarantee arrives in stages, later stages are conditional on the first one working. That may indicate the project will proceed more slowly than originally planned.

In the wider picture

This story should be read alongside Nvidia's other recent moves. Over the same period the company has been working on a $500 billion plan to protect the resale value of its GPUs and investing in data centre developers.

The common direction is this: Nvidia no longer merely sells chips, it also ensures the money to buy them exists. That is a structure which grows sales, but it is also one that takes its customers' risk onto its own books.

Halving the guarantee can be read as a sign that this balance is being argued about inside the company.

The risk of circular financing

The industry has begun naming this structure: circular financing. Nvidia gives its customer a credit guarantee, the customer uses that credit to buy chips from Nvidia, and Nvidia books the sale as revenue.

Each step is legitimate on its own. Taken together, though, part of the revenue ends up financed by a guarantee the company itself issued. While demand is real that is not a problem; when demand weakens, the sale and the guarantee become problems at the same time.

Staging the guarantee limits precisely that risk. If the first half works the second follows; if it does not, the company is not carrying the whole of a $250 billion commitment.

What to watch

  • When the project's first phase comes online, and what condition the second half of the guarantee is tied to.
  • Whether similar structures appear in other data centre deals.
  • How commitments of this kind are reported on Nvidia's balance sheet.