NVIDIA backs OpenAI's Ohio data centre with $105B guarantee
What's the story
NVIDIA has announced a massive guarantee of up to $105 billion to help OpenAI lease a new data center in Ohio. The facility is being developed by SB Energy, a subsidiary of SoftBank. This is one of NVIDIA's biggest infrastructure financing commitments yet. The tech giant also plans to invest $1.5 billion in SB Energy, following an earlier investment from OpenAI and SoftBank for data center expansion.
Financing approach
NVIDIA's infrastructure financing strategy
The latest deal is part of NVIDIA's strategy to finance the infrastructure around its chips, a move that has been known to drive demand.
However, this has also raised concerns about circular funding flows between the chipmaker and its customers.
Last week, these concerns were further fueled when NVIDIA teamed up with six major financial institutions, including BlackRock, to launch financing platforms targeting over $500 billion in third-party funding for AI infrastructure.
Clarification
Clarification from Jensen Huang
NVIDIA's CEO Jensen Huang clarified that the new deal isn't circular financing.
He said, "We are securing long-lived infrastructure for NVIDIA compute so OpenAI can deploy the most productive AI factories that can be upgraded repeatedly with each new generation delivering more intelligence and better economics."
The company will be the exclusive chip provider for the Pike County facility in Ohio, which will have a total capacity of up to 8GW.
Lease details
OpenAI's lease and financing structure
OpenAI has signed a 20-year lease for the site. The financing structure is still being defined but will include equity, possibly from a future SB Energy IPO and SoftBank direct investment.
After defining the total equity amount, there will be a debt portion likely to include project finance loans and possibly public debt like bonds.
Guarantee details
NVIDIA's guarantee details
NVIDIA's guarantee covers a portion of the lease and power payments, as well as a commitment to ensure the site retains a minimum value.
This is not the full cost of the project or all of OpenAI's obligations.
If OpenAI defaults on rent, NVIDIA will cover the gap between that guaranteed minimum value and whatever the owner can recoup by re-leasing or selling the site.
Revenue projections
Potential revenue growth for NVIDIA
Huang said the site, which would have an initial capacity of 4.25GW, could contribute as much as $200 billion to NVIDIA's revenue.
One gigawatt of computing power can provide enough electricity for about 750,000 US homes on average.
Overall, NVIDIA could make $600 billion in revenue from OpenAI by 2030 by selling it 16GW of computing power, including an expansion of the Ohio site by 3.75GW.