Nvidia Makes $750 Billion AI Bet, Rekindling Concerns Over "Circular Financing"

5 Billion Dollar Investment in SSI

500 Billion Dollar Deal with SK Group

Discussing 250 Billion Dollar Payment Guarantee for OpenAI

"Could Inflate Demand for Its Own Chips"

Nvidia has decided to invest approximately 5 billion dollars (about 7.3 trillion won) in Safe Superintelligence (SSI), an artificial intelligence (AI) startup led by Ilya Sutskever, co-founder of OpenAI. As Nvidia moves to inject a large sum into an AI company that has not yet released any products or research results, controversy is growing once again over the so-called "circular financing" wherein Nvidia directly supports the semiconductor purchases of its future clients.

According to the Financial Times (FT) and Bloomberg News on the 27th (local time), Nvidia and SSI reportedly entered into an investment and long-term partnership worth 5 billion dollars (about 7.3 trillion won) on the same day.

The large investment is expected to be made in stages, depending on SSI’s achievement of certain research and business milestones. SSI plans to use this funding to adopt Nvidia’s next-generation AI system, Vera Rubin, and increase its computing power tenfold over the next 12 months.

SSI is a private AI startup founded by Sutskever after he left OpenAI in 2024. Sutskever is one of the key researchers responsible for the core technology behind the development of ChatGPT. The company employs only a few dozen people and has yet to launch its first product or release any research findings.

Nevertheless, when SSI raised 2 billion dollars (approximately 3 trillion won) last year from investors such as Green Oaks, Lightspeed Venture Partners, and Andreessen Horowitz, the company was valued at 32 billion dollars (about 47 trillion won). Nvidia had previously invested in SSI as well.

This investment in SSI is seen as an extension of Nvidia’s strategy of supplying capital to potential customers such as AI model developers and data center operators.

When Nvidia invests in an AI company, that company uses the funds it receives to buy Nvidia’s AI semiconductors and systems. Nvidia recognizes these purchases as sales, and the resulting increase in sales and the growing valuation of the AI company can lead to further investments and capital raising.

The FT assessed this deal as one of the growing instances of circular financing between AI semiconductor companies and model developers. Nvidia’s competitor AMD also recently decided to invest up to 5 billion dollars in the AI company Anthropic.

Jensen Huang, CEO of NVIDIA, spoke on the 24th (local time) at The Midway in San Francisco, USA, during the 'San Francisco AI Summit' attended by President Jae Myung Lee. Photo by Yonhap News

Signed Contract Worth 500 Billion with SK... Payment Guarantees and Financial Backing for OpenAI

According to Bloomberg, the total value of Nvidia’s recently announced or discussed major AI-related deals exceeds 750 billion dollars (about 1,100 trillion won).

Nvidia is discussing providing OpenAI with payment guarantees worth up to 250 billion dollars (about 366 trillion won), so that OpenAI can lease computing resources from large data centers in the United States. Additionally, Nvidia is considering providing up to 350 billion dollars (about 513 trillion won) in financing, to help OpenAI purchase Nvidia semiconductors for use in that business.

Both of these deals are linked to the 10 GW data center project being developed in Ohio by SB Energy, a subsidiary of SoftBank Group, so it is difficult to directly combine their totals. Bloomberg reported that, as negotiations are still in the early stages, the deals could fall through or their terms might change.

Previously, Nvidia announced that it would pursue projects with SK Group worth more than 500 billion dollars (about 733 trillion won). This value includes Nvidia’s purchases of high-bandwidth memory (HBM) from SK hynix and SK Group’s adoption of Nvidia’s AI supercomputers.

The collaboration with SK Group is more akin to a long-term mutual purchase and supply contract between the two companies than to a new investment. The 750 billion dollars cited by Bloomberg includes such transactions, as well as the ongoing discussions of payment guarantees for OpenAI.

In financial markets, concerns have emerged that Nvidia’s investments and financial support could make actual demand for AI semiconductors appear larger than it truly is. Billy Leung, an investment strategist at Global X Management, commented regarding Nvidia’s discussions of payment guarantees for OpenAI: “This further exacerbates already controversial supplier financing. While it sends a strong signal of demand, it is also evidence that the financial burden of building out AI infrastructure is increasing.”

Mandeep Singh, an analyst at Bloomberg Intelligence, said, “Nvidia wants the current rate of AI infrastructure construction to be maintained. Even if investment stops for just six months, it could pose significant risks to Nvidia.”

Nvidia denies accusations of circular financing. CEO Jensen Huang previously stated, regarding the company’s investment in CoreWeave last January, that the funds provided by Nvidia amount to only a portion of the total capital the company must ultimately secure, and argued that “the claim of circularity is unfounded.”

This content was produced with the assistance of AI translation services.