Nvidia faced pressure to widen AI backstop, Bloomberg says

Before Jensen Huang's ouster threw Nvidia into turmoil, one of his signature Wall Street projects was already in trouble. Months after its launch, a $500 billion partnership with six of the world's largest asset managers had produced no deals. In the past month, some customers and Wall Street partners have pushed the chipmaker to enlarge its financing backstop, Bloomberg reported on Thursday, citing people familiar with the private negotiations.news.bloomberglaw.com

The report adds to doubts about how much financial support Nvidia will keep giving the AI industry now that Huang is gone. Chief Financial Officer Colette Kress has been named interim CEO, and director Harvey Jones has become the board's first chair.fortune.com

The Broadcom gap

Nvidia had offered residual value support covering up to 25% of each deal. That is a smaller share than rival Broadcom ↗ 5.54% has offered, and some people involved say the gap has made deals harder to close, according to a translated version of the Bloomberg report. Broadcom has covered 72.5%, or about $43 billion, of a $63 billion financing that supports Anthropic. One source said Nvidia could announce its first deals as early as January, as long as Huang's departure does not derail them or the whole plan.moomoo.com

Huang introduced the platform in August alongside Apollo Global Management ↘ 1.30%, BlackRock ↘ 0.79%, Blackstone ↘ 2.84%, Brookfield Asset Management ↘ 2.19%, Goldman Sachs The Goldman Sachs Group, Inc. ↘ 1.43% and KKR ↘ 2.85%. At the time he said Nvidia had the option to backstop up to $125 billion, or 25% of potential deals.bnnbloomberg.ca

A more cautious interim chief

Kress has her own record on large guarantees. As finance chief, she pushed back on a proposed $250 billion credit backstop for OpenAI that would have let it fill eight gigawatts of data center space with Nvidia's newest chips, The Information reported, as summarized by FourWeekMBA. Nvidia later split that arrangement in two and has guaranteed only the first part, roughly $100 billion. People told The Information that Kress "may take a more conservative approach than Huang did."fourweekmba.com

The 'central bank of AI'

In its most recent earnings report, Nvidia listed $164.5 billion in financial commitments. They include an obligation capped at $105 billion for an OpenAI data center in Ohio, plus more than $50 billion in lease and capacity guarantees. Columbia Business School professor Stijn Van Nieuwerburgh puts Nvidia's total obligations at about $400 billion, which is still a small fraction of its market value. Former FDIC chair Sheila Bair told CNBC that Nvidia is not too big to fail "in a bank sense," but said that "Nvidia going down would be a pretty seismic event."cnbc.com+1

Semafor's Liz Hoffman wrote that Huang's exit ends the "Nvidia put", and that losing such a large buyer could raise the cost of AI debt and equity for everyone. One AI infrastructure investor was more direct, telling Fortune: "That Nvidia guarantee is not worth what it was worth a week ago".semafor.com+1