The flurry of criss-cross transactions and partnerships among AI chipmaker Nvidia and its customers has created much consternation about circular financing. The term itself is ominous, and the companies themselves reject it. After all, circularity suggests something that ultimately goes nowhere.
But for all the fancy ways in which Nvidia is extending its support to the likes of OpenAI and data centre builders that use its chips, what’s really happening is old-fashioned vendor financing. Like telecoms equipment manufacturers, planemakers and department stores of old, the chipmaker is basically writing cheques to enable its customers to buy more of its products than they could otherwise afford.
There are a few twists to this new incarnation of the retail store card. For one thing, Nvidia has funded OpenAI and data centre operator CoreWeave by buying shares rather than making loans. Its unlisted equity investments hit $42bn at the end of April, from $3bn a year earlier, after announcing a $30bn investment in OpenAI and $10bn in Anthropic.