Nvidia's $750B AI Deal Spree Threatens Startup Valuations

For startup founders and venture capitalists, Nvidia’s latest mega‑deals are a double‑edged sword. The $500 billion SK Hynix initiative and the $250 billion OpenAI lease guarantee promise an unprecedented flood of AI compute, potentially lowering barriers for young companies building on large models. But the same circular financing mechanisms that propel growth also risk creating an artificial demand floor—and if that floor cracks, startups that have built their business models on cheap, subsidized infrastructure could face a sudden capital and compute crunch.

Nvidia Corp. is orchestrating a new wave of AI infrastructure financing that collectively exceeds $750 billion, rekindling fierce debate over whether the chip giant is artificially stoking demand for its own products through circular financing. The centerpiece is a freshly disclosed artificial intelligence initiative with the parent of South Korean memory maker SK Hynix, valued at more than $500 billion, which Nvidia confirmed late Friday. Simultaneously, the company is in advanced discussions to provide up to $250 billion in guarantees that would allow OpenAI to lease computing capacity from an unnamed U.S. data center project, and separately may finance as much as $350 billion of OpenAI’s purchases of Nvidia chips for the same project. These figures, even as preliminary or aspirational, vastly eclipse the scale of any prior chip-industry financing package and underscore Nvidia’s determination to lock in dominant demand for its GPUs before competitors can mature.

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The $500 billion SK Hynix initiative and the $250 billion OpenAI lease guarantee promise an unprecedented flood of AI compute, potentially lowering barriers for young companies building on large models.

The circular-financing concern is straightforward: Nvidia takes equity stakes in, extends credit to, or guarantees obligations for companies that then use that capital to buy Nvidia hardware. The company has in recent years acquired stakes in leading AI developers such as OpenAI and in fellow chipmakers including Marvell Technology, explicitly aiming to fuel industrywide growth. But skeptics warn that the arrangement introduces skewed incentives, encourages overinvestment, and could magnify losses if AI end-user demand falls short of the colossal build-out projections that justify these deals. Gary Tan, portfolio manager at Allspring Global Investments, captured the unease: “While Nvidia’s investments and partnerships reinforce confidence in long‑term AI buildouts, investors remain concerned about circular financing. Capital is increasingly being used to fund future AI customers and infrastructure deployments.” The deals, in effect, create a closed loop where Nvidia’s own balance sheet stimulates the purchase of its processors, making it difficult to distinguish organic demand from self‑generated momentum.

The market backdrop makes the timing particularly sensitive. Nvidia is already the world’s most valuable company, riding a historic surge in AI accelerator sales. Any sign that its revenue growth is propped up by its own financing rather than by independent third‑party commitments could lead to a sharp re‑rating of its stock and ripple through the entire AI ecosystem. The $500 billion SK Hynix initiative aims to secure next‑generation high‑bandwidth memory crucial for Nvidia’s upcoming GPU architectures, marrying chip supply with massive capital deployment. The OpenAI guarantees and chip financing, if finalized, would single‑handedly underwrite a substantial portion of the data center capacity that the AI startup needs to continue scaling its models.