{"text":[[{"start":7.28,"text":"When Nvidia first lent large amounts to some of its customers to finance sales of its chips, it fed worries that an AI bubble was being inflated by an orgy of “circular” financing."}],[{"start":17.64,"text":"A year on, something new is taking shape. These days, Nvidia has found ways to limit its own exposure, while co-opting a wider group of financiers. Equally significant, it is using its credit to seed new markets and a fresh business model."}],[{"start":33.4,"text":"This hasn’t silenced all the doubters. But for the world’s biggest chip company, it signals a sea change in the strategic use of its balance sheet and a new phase in the AI boom."}],[{"start":43.6,"text":"One sign of this was last week’s framework agreement for six Wall Street financiers to extend some $500bn to Nvidia’s customers, with Nvidia guaranteeing up to a quarter of some of the transactions. Another was this week’s news that it is providing an up to $105bn backstop for a new OpenAI data centre in Ohio."}],[{"start":65.08,"text":"Those guarantees could still leave it on the hook for large amounts, and it is unclear how much more exposure like this it will take on. But for now, the deals have done nothing to weaken Nvidia’s “excellent financial profile”, according to Moody’s, which has affirmed its credit rating."}],[{"start":80.26,"text":"Even if it has found a way to reduce its own risk, though, Nvidia has left tougher questions for credit markets to chew on. CEO Jensen Huang claims his company’s chips are in wide enough use that they amount to a new asset class against which financiers can comfortably lend. But it is an asset class without the extensive history that credit analysts rely on."}],[{"start":100.6,"text":"The current acute supply shortage has created extreme conditions. SpaceX, for one, recently said it would earn enough from renting out its AI facilities to cover the entire cost of building its AI data centres in less than a year. With returns like that, no wonder the infrastructure boom keeps gaining steam."}],[{"start":117.26,"text":"What would happen were the supply/demand imbalance to reverse is another question. Nvidia has made much of the broad use of its chip architecture and CUDA software in the AI world. If one customer defaults, it says, there will always be another ready to take up unused capacity. It also claims that its older chips are not rendered obsolete by each new generation of technology. That argument got a boost last week when CoreWeave, a start-up cloud company, or neocloud, said it had signed a deal to rent some of Nvidia’s A100 chips until 2029, nine years after that generation of chips was introduced."}],[{"start":153.52,"text":"In a downturn, however, there might not be many ready takers if a customer defaulted. Also, if there was a surplus of newer, more efficient chips, it would no longer make sense to keep running older, power-hungry A100s, even if they had been fully depreciated."}],[{"start":168.2,"text":"But with little sign of a reversal on the horizon — Moody’s, for one, predicts a shortage of data centre capacity in the US for “at least the next four to five years” — these are risks many lenders are likely to gloss over."}],[{"start":180.62,"text":"Meanwhile, Nvidia has also brought its balance sheet into play to support a newer range of customers: neoclouds, which are rapidly expanding in number around the world, as well as sovereign and enterprise customers that want to run their own AI data centres, rather than tap into the giant US cloud platforms. The US data centre boom is already in full swing, but this looks like a strategy for the rest of the world."}],[{"start":204.24,"text":"Along with the selective use of credit, Nvidia has said it intends to take a share of the revenues these new data centres generate. In effect, it is reaching deeper into the cloud market without taking on a full-scale asset base. That makes it, as analysts at Stifel put it, “an emerging asset-light pseudo-cloud”."}],[{"start":221.42,"text":"The direction has been clear for a while. Nvidia has been inching towards supplying all the technologies needed to create AI services. That includes last week’s release of its latest open-source AI model, at a time when US demand is growing for an alternative to open models from China. It has also been developing complete AI solutions for “vertical” markets like healthcare, potentially opening the door to new types of software revenue."}],[{"start":245.52,"text":"How far this will go is an open question. But with its balance sheet at its back, Nvidia is ready to lean further into the next phase of the AI boom."}],[{"start":262.56,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787286430_4580.mp3"}