Nvidia Became Your Landlord's Co-Signer, and Your Landlord Is CoreWeave

Nvidia used to sell chips. Now it co-signs leases.

Jensen Huang built the most valuable company on Earth, then looked at it and thought, "What if I were also a bank?"

Here is the math. ,Nvidia had $36 billion in off-balance-sheet AI cloud agreements for neoclouds, plus a guarantee on up to $105 billion for a proposed 10 gigawatt OpenAI data center in Ohio., ,It also signed on as tenant for $20 billion in future data center leases., That is a lot of paperwork for a company that makes graphics cards.

Off-balance-sheet. Love that phrase. It's like saying your credit card debt doesn't count because it's in your glove box.

The customers are going great. ,CoreWeave, Nebius and IREN, all cash-burning companies in Nvidia's portfolio, are down at least 30% this month., ,Credit default swaps on CoreWeave now exceed 11%, with bonds due in 2031 and 2032 yielding over 15%., Somebody out there is paying 11% a year to insure against CoreWeave failing. That person is either very smart or has met CoreWeave.

Huang remains calm. ,He told CNBC that demand for neoclouds is "off the charts.", Charts do go off. Usually downward.

His diagnosis for the sector? ,"There's a scarcity of capital.", Correct. And the one guy with capital is the guy selling the chips. Nvidia lends money to customers so customers can buy Nvidia chips. It's a vending machine that also hands you the quarters.

David Trainer of New Constructs put it politely. ,"If the demand for compute doesn't meet these really super lofty expectations, we're going to have a problem.", He said "we." Bold. He's not on the hook for $105 billion.

To be fair, Nvidia says it ,won't have to pay up unless participants in the project default., That's like a lifeguard saying he'll only get wet if someone drowns. The pool is at 11% default insurance.

Retail traders will read this and buy the dip. ,Nvidia fell 4.40% to $212.21 on Thursday., You'll call it a discount. Your portfolio calls it Tuesday.

Nvidia is the most powerful company in AI, and its biggest risk is whether its friends pay it back. Congratulations, Jensen. You've invented the cousin who needs a loan.

Photo by BoliviaInteligente on Unsplash