Nvidia's Circular Financing: Why Guarantees Instead of Investments in 2026?

When the announcement of a “up to $100 billion investment in OpenAI” broke in the fall of 2025, Nvidia’s stock price soared. However, by July 2026, reports of a potential “OpenAI guarantee” caused the stock to drop nearly 5% in a single day.

In the interim, Nvidia’s circular financing model evolved from cash-based equity investments to a guarantee of up to $105 billion, covering OpenAI’s potential lease defaults. (Figures confirmed as of late September 2026)

It was the same company supporting the same partner in the same direction, yet the market reaction was completely opposite.

At first, this seemed strange. Why would a guarantee—which doesn’t require immediate cash outflow—be treated as worse news than an actual investment?

Only after laying out the disclosures and reports chronologically did the reason become clear. It wasn’t the amount that changed; it was where the risk was placed.

How was Nvidia’s circular financing originally structured?

The starting point was simple: a loop where Nvidia invests cash into an AI company, and that company uses the funds to buy Nvidia chips.

A symbolic moment occurred in September 2025.

Nvidia and OpenAI announced a letter of intent to deploy a 10-gigawatt (GW) Nvidia system, with Nvidia promising to invest up to $100 billion in OpenAI in phases as the systems were installed. Because the chip seller was becoming a shareholder of the chip buyer, the term “circular financing” began to circulate.

These equity investments were not limited to OpenAI alone.

According to Nvidia’s quarterly report (10-Q) for the period ending July 26, the company held $99 billion in equity investments at that time, with another $25 billion in committed but unexecuted investments.

Why did the $100 billion equity investment shrink to $30 billion?

The $100 billion promise didn’t make it to the finish line.

In early 2026, Nvidia transitioned this into an equity investment of $30 billion as part of a new OpenAI funding round.

In a February interview, CEO Jensen Huang stated that [the $100 billion "was never a firm commitment from the start"](https://fortune.com/2026/02/02/jensen-huang-nvidia-ceo-on-openai-investment-never-a-commitment/) and that they would invest "one step at a time." Subsequent reports indicated that [the $30 billion replaced the previous $100 billion partnership plan](https://www.outlookbusiness.com/amp/story/corporate/nvidia-to-invest-30bn-in-openai-previous-100bn-partnership-plan-scrapped). By August, analysts noted that Huang had suggested this $30 billion might be the last equity investment in OpenAI.

Up to this point, it looked like Nvidia was pulling back. But right around that time, a much larger number appeared under a different name.

The $105 billion Ohio Nvidia guarantee: What exactly was promised?

What Nvidia promised was a lease payment guarantee for OpenAI data centers. If OpenAI fails to pay its 20-year lease, Nvidia will cover the shortfall up to a maximum of $105 billion.

The initially reported numbers were much higher.

When reports broke in late July that Nvidia was considering a $250 billion guarantee for an Ohio campus and discussing $350 billion in financing for chip purchases, the market reacted immediately. Nvidia’s stock fell about 5% in a day, SK Hynix dropped over 7%, and Nvidia lost its position as the world’s most valuable company to Apple.

The final plan was confirmed in Nvidia’s 8-K filing on August 17. The key points are:

• Scope: The PORTS-Pike technology campus in Pike County, Ohio, built by SoftBank’s SB Energy, approximately 4.25GW.
• Structure: SB Energy builds and OpenAI leases for 20 years; only Nvidia infrastructure is used in the campus.
• Guarantee Coverage: Credit enhancement for land, power, and building shells, capped at $105 billion.
• Effective Date: Becomes effective as each stage of the data center becomes operational, with the first stage expected in Nvidia’s fiscal year 2029.
• Addition: Option to guarantee an additional 3.8GW expansion and a $1.5 billion equity investment in SB Energy.

Fortune pointed out that this final plan is $145 billion smaller than the initial reports, suggesting that investor backlash forced the amount down. CEO Huang’s rebuttal was clear. According to CNBC, he wrote on X, “Is this circular financing? No. OpenAI pays the rent.”

Why Nvidia’s circular financing shifted from equity to guarantees

Guarantees create the same demand without spending cash upfront. This is the primary reason.

Equity investments require immediate cash. If you invest $30 billion, that money leaves Nvidia’s coffers that day, and every fluctuation in the value of that equity impacts earnings.

A guarantee is different. No money leaves on the day of signing, and the maximum exposure is only disclosed in the footnotes; the $105 billion is not recorded as a liability until the loss becomes a reality.

From the perspective of those lending the money, the logic is even clearer.

OpenAI’s revenue is growing fast, but the company is still operating at a loss. There are not many financial institutions willing to fund the construction of a multi-gigawatt data center based solely on a 20-year lease contract from such a company.

When Nvidia’s name is attached, the calculus changes. With the promise that Nvidia will pay if the tenant doesn’t, developers can borrow money more cheaply and start construction.

And that campus will only house Nvidia infrastructure.

Nvidia’s credit builds the building, the building creates demand for Nvidia chips, and the revenue from those chips supports Nvidia’s credit.

The loop remains the same; only the fuel driving the loop has shifted from cash to credit.

Therefore, rather than the narrative that “Nvidia is pulling out,” it is more accurate to interpret that circular financing has simply moved to a less visible position.

Why Nvidia’s guarantees might be riskier than equity investments

Honestly, just looking at the numbers, the guarantee seemed safer.

There is a cap, it is activated in stages, and as noted in the quarterly report, the guarantee amount decreases over the 20-year lease term. If OpenAI pays its rent consistently, Nvidia pays $0.

The problem is when the guarantee is triggered.

A world where OpenAI cannot pay its rent is a world where AI demand has collapsed, and in that scenario, Nvidia’s chip orders would likely have plummeted as well.

It is a structure where the bill for the guarantee arrives at the exact moment revenue is disappearing.

In finance, this is called ‘wrong-way risk’.

With equity investments, you only lose the money you have already spent. With a guarantee, you are forced to pay out new money at the worst possible time.

This is not the first time we’ve seen this.

In 2000, telecommunications equipment company Lucent expanded its vendor financing, lending money to customers to buy their equipment; [by late September 2000, the amount reached $8.1 billion](https://www.treasuryandrisk.com/2002/01/01/rebuilding-credit-and-credibility-at-lucent). When the telecom bubble burst, the startups that borrowed the money collapsed all at once, and Lucent had to scramble to create a credit committee and reduce its exposure to $5.5 billion.

Of course, there are major differences. Lucent lent cash directly to unknown startups. Nvidia has provided a capped, phased guarantee to the world’s largest AI company. We cannot conclude they will have the same ending. However, the underlying structure—where the seller shoulders the payment ability of the buyer—is very similar.

Here is a table comparing Nvidia’s equity investments and guarantees:

Category	Equity Investment (OpenAI $30B)	Lease Guarantee (Ohio up to $105B)
Cash outflow timing	Immediately after contract	When OpenAI fails to pay rent
Bookkeeping	Recorded as investment assets; reflects value changes	Maximum exposure disclosed in footnotes
Maximum loss	Amount invested	$105B cap, decreases over time
Loss scenario	Decline in OpenAI corporate value	Tenant default due to AI demand slump
Relationship to earnings	Relatively independent	Likely occurs alongside decline in chip sales

The next step in Nvidia’s circular financing: Offloading risk

The next step after guarantees has already begun.

Nvidia is creating a structure where external capital and insurers share the risk instead of using its own name.

In August, Nvidia formed a platform with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to attract over $500 billion in external capital for AI infrastructure.

On September 29, the FT reported that Nvidia is discussing ways to share the risk of AI chip-backed loans with insurers.

In this structure, if a mid-sized cloud company (Neo-Cloud) borrows money using Nvidia GPUs as collateral and defaults, and the sale of the collateral doesn’t cover the loan, insurance covers the loss. Nvidia has reportedly provided chip depreciation and compute pricing data to the insurers.

The trend is quite consistent. In 2025, they paid cash; in the summer of 2026, they lent their name; and now they are trying to shift the risk to other people’s money and insurance.

Nvidia’s books are getting lighter, but the risk is spreading throughout the financial system.

Personally, there are two numbers I will be watching.

One is the guarantee exposure, which changes every quarter, and the other is whether OpenAI is actually paying rent in fiscal year 2029, when the first stage becomes effective. The second number will only be verifiable after the first stage is activated.

Notice: This article is general information based on public data at the time of writing and is not a recommendation to buy or sell any specific stock or financial product. Figures and contract terms may change in the future.