Wedbush: NVIDIA (NVDA.US) Serving as a Backstop for OpenAI Involves Risks, But It's a Long-term Bet Worth Making

According to Odaily Financial News APP, earlier reports indicated that Nvidia (NVDA.US) is in discussions to provide OpenAI with up to $250 billion in credit guarantees to support the leasing and construction of a hyperscale artificial intelligence (AI) data center campus in Ohio. In response, Wedbush Securities noted in its latest report that while this move may introduce additional risks for Nvidia, overall it is a positive step to strengthen the long-term strategic ties between the two parties.

It is understood that the core of this guarantee arrangement is to enable OpenAI to leverage Nvidia’s credit standing to raise substantial debt funding, which will be used to secure the lease and construction of a 10-gigawatt (GW) data center campus in Pike County, Ohio. Sources emphasized that this guarantee only covers the leasing and construction debt and does not include Nvidia chips themselves—negotiations around chip supply and financing are ongoing separately. The site was formerly a uranium enrichment plant and is now being redeveloped by SB Energy, a SoftBank-owned energy subsidiary, in partnership with the U.S. Department of Energy. It is estimated that 10 GW is equivalent to the annual electricity usage of about 8 million American households, and the total cost of the data center campus could exceed $500 billion.

From Nvidia’s perspective, Wedbush analyst Matt Bryson wrote in a client report that such projects would “further cement Nvidia’s relationship with one of the world’s leading cutting-edge model developers,” which helps mitigate competitive risks at a time when more foundry capacity might eventually erode market share. However, he also warned: “Cyclical financing arrangements inevitably expose Nvidia to more risks; if AI demand slows or OpenAI falls behind competitors, Nvidia could face exposure to its client’s operational issues.”

Nevertheless, Bryson still believes that the ongoing boom in large-scale data center construction and Nvidia’s central role in these projects are positive for the world’s largest AI accelerator and hardware supplier. He further pointed out that this project likely attracted “attention and support” from the U.S. federal government, as “cooperation with the (Trump) administration to date has been highly lucrative for chip companies.”

Currently, the capital ties between Nvidia and OpenAI are growing ever closer. In September last year, Nvidia had announced intentions to invest up to $100 billion in OpenAI as a strategic partner, contingent upon OpenAI deploying at least 10 GW of Nvidia systems. Although that investment ultimately did not materialize, Nvidia still invested $30 billion in OpenAI’s record-breaking funding round this March. Subsequently, Nvidia CEO Jensen Huang remarked that this would “likely be” the company’s final investment in OpenAI prior to its IPO. In June of this year, OpenAI confidentially filed for its initial public offering with the U.S. Securities and Exchange Commission, but no official timeline has been disclosed. At present, private investors reportedly value OpenAI close to $1 trillion, betting that it will maintain its lead in AI and find a sustainable business model—even as open-source models from China and elsewhere continue to undermine its pricing power.

As a co-driver of the project, SoftBank is also a major investor in OpenAI, and the two parties announced a $1 billion investment in SB Energy earlier this year. The Ohio data center is regarded as one of the most ambitious projects in the U.S. AI infrastructure boom, and as related financing negotiations progress, the final structure and risk exposure for all parties may still change.