Nvidia Corp. is pursuing AI deals worth more than $750 billion [1], sparking warnings from analysts about a potential circular financing bubble.
This strategy matters because it may create an artificial demand loop where the chipmaker supports the very customers purchasing its hardware. If these cloud startups cannot generate independent revenue, the entire AI ecosystem could face a systemic correction similar to the dot-com crash.
Reports this month indicate Nvidia has implemented a program to rent back unsold AI chips in exchange for a share of cloud revenue [2]. This mechanism allows cloud-computing firms to maintain their balance sheets while continuing to acquire hardware. However, analysts such as Jim Cramer said this frenzy echoes the circular financing patterns seen before previous tech bubbles [3].
The financial scale of these commitments is substantial. CoreWeave debt tied to Nvidia financing currently totals $24.9 billion [4]. This level of leverage has raised concerns among some observers that pension funds could be exposed to significant risk if the AI market softens [4].
These developments follow a period of unprecedented growth for the company. Nvidia’s market capitalization crossed $5 trillion on July 10 [4]. The company's aggressive expansion is designed to keep AI demand flowing, and provide critical support for cloud startups as they scale their infrastructure [2].
Critics argue that these practices may mask the actual commercial viability of AI services. By providing the financing or lease-back options that enable the purchase of chips, the manufacturer effectively subsidizes its own growth, a cycle that some experts say could lead to inflated valuations across the sector [1, 3].
“Nvidia is pursuing AI deals worth more than $750 billion”
The emergence of circular financing in the AI sector suggests a shift from organic growth to a leveraged expansion. By intertwining its financial success with the solvency of its primary customers, Nvidia is creating a symbiotic relationship that minimizes short-term friction but increases long-term systemic risk. If AI applications fail to monetize at a rate that supports this $750 billion investment scale, the resulting correction could impact not only tech stocks but also the institutional investors and pension funds holding this debt.
