Jensen Huang is gone. Will the AI industry pay the price?

{"text":[[{"start":11.76,"text":"With Jensen Huang at the helm, Nvidia ploughed its vast profits into bankrolling AI start-ups, suppliers and the customers buying its chips."}],[{"start":19.633,"text":"“We are not your largest investor, but we are your best investor,” Nvidia’s chief told an audience of partners in a converted church in London’s Mayfair last month."}],[{"start":28.614,"text":"On Thursday, Huang resigned from the chipmaker he co-founded 33 years ago due to a scandal over extramarital affairs, a move that threatens to unravel a web of financial dependencies that binds the AI ecosystem together."}],[{"start":42.92,"text":"Huang has made Nvidia the AI industry’s backer of last resort — and he did much of the dealmaking himself. Despite having dozens of direct reports, he was personally involved in many of its investments worth billions of dollars, according to company founders who have received money from Nvidia."}],[{"start":null,"text":"

"}],[{"start":57.975,"text":"When CoreWeave, the neocloud and prodigious buyer of Nvidia chips, saw its IPO falter last year, Huang led Nvidia to step in with an anchor order. When OpenAI needed support to build a massive data centre campus in Ohio, Huang had Nvidia guarantee up to $105bn of its lease and power payments."}],[{"start":77.8,"text":"He then worked with Wall Street groups on a plan to use Nvidia’s balance sheet to mobilise more than $500bn of outside capital for chip financing. Several deals are under way, people familiar with the matter said. Nvidia is planning to invest $10bn in Anthropic in a private placement alongside the Claude maker’s initial public offering next week."}],[{"start":100,"text":"His dealmaking, and the use of Nvidia’s balance sheet to underpin it, expanded so quickly over the summer that the chipmaker added a new risk factor to the quarterly filing it made at the end of August."}],[{"start":108.971,"text":"Nvidia warned its commitments and guarantees “expose us to financial, counterparty and execution risks and may not provide anticipated benefits”."}],[{"start":null,"text":""}],[{"start":117.364,"text":"“We wonder what will happen to the company’s myriad of investments in the space, various backstops and residual guarantees,” wrote analysts at Bernstein while slashing their Nvidia price target in half."}],[{"start":128.72,"text":"Scores of start-ups also benefited from Nvidia’s open cheque book. Since the start of the year, the chipmaker and its venture arm have made more than 120 investments, roughly one every two and a half days, according to PitchBook."}],[{"start":142.02,"text":"All the dealmaking brought Nvidia’s equity investments, including those it had committed to make, to $124bn at the end of July."}],[{"start":null,"text":""}],[{"start":151.56,"text":"On a tour of Europe last month, Huang said Nvidia had poured $8bn into the region over the past year and pledged $2bn more. On stage in London, he pointed at founders in the crowd and declared: “I’m gonna invest in you, I’m gonna invest in you, I’m gonna invest in you!”"}],[{"start":169.7,"text":"Nvidia’s role as an “anchor investor” on the continent had brought as much as $60bn in follow-on funding from other backers, creating “thousands of jobs”, he claimed."}],[{"start":179.77,"text":"“Two years ago, the thing to do [among investors] was to watch whoever Nvidia buys from, figure out who is in our supply chain, and just invest in that,” he said. “Now whoever I invest in, yeah, invest in those guys. And so far it’s working out pretty well.”"}],[{"start":null,"text":""}],[{"start":195.54,"text":"According to investment tracker Dealroom, Nvidia’s transactions include $35bn of planned acquisitions and acqui-hires such as Hugging Face and Groq; $23bn of stakes in listed companies including Intel and Nokia; and more than $60bn deployed into more than 200 start-ups, including OpenAI, Anthropic and Elon Musk’s xAI."}],[{"start":217.056,"text":"Few have benefited more than the upstart AI cloud providers known as neoclouds that Huang has nurtured to both buy Nvidia’s chips in bulk and reduce its dependence on the big cloud groups, which are increasingly designing their own processors."}],[{"start":null,"text":""}],[{"start":230.596,"text":"PitchBook data shows Nvidia has done at least 15 deals this year with neoclouds and other AI infrastructure groups, participating in rounds that raised $24bn. An executive at one of these cloud computing groups said they expected the Nvidia dealmaking to mostly come to a halt until the uproar around Huang was resolved."}],[{"start":250.04,"text":"Beyond its equity stakes, Huang has pushed Nvidia deeper into helping the neoclouds it backs secure financing, data centre space and power, locking in demand for its chips in the process."}],[{"start":262.013,"text":"By the end of July, Nvidia had committed $36bn to buying computing capacity from AI cloud groups if they could not find other customers, contracts they can borrow against to buy its chips."}],[{"start":274.479,"text":"It had also signed $20bn of data centre leases it plans to hand to others, including a 1GW campus in Texas where it has sublet part of the space to Lambda, a neocloud Nvidia has backed. Lambda will use the Nvidia chips it buys to supply computing power to Anthropic."}],[{"start":292.57,"text":"Nvidia’s largest financial guarantee to date backs OpenAI’s lease payments at a 4.25GW campus in Ohio being developed by SoftBank-backed SB Energy. The up to $105bn in credit support will help SB Energy finance construction and in exchange the campus will run Nvidia hardware exclusively for 20 years."}],[{"start":314.76,"text":"Huang wrote at the time that data centre sites were the next resource he needed to lock up for Nvidia’s chips, saying the company was applying the “same discipline” it used with chip supply to “secure [land, power and shell] capacity exclusively for Nvidia AI factories”."}],[{"start":330.64,"text":"“Is this circular financing?” he wrote. “No. OpenAI will pay the lease.”"}],[{"start":335.52,"text":"At October’s London event, Huang gave the recipients of Nvidia’s cash a tongue-in-cheek reminder of where the power in the AI industry then lay."}],[{"start":343.062,"text":"“I’m going to give you the same advice that I received [33 years ago from] Don Valentine,” the late venture capitalist who founded Sequoia Capital: “If you lose my money, I will kill you.”"}],[{"start":355.36,"text":"Data visualisation by Steven Bernard and Alan Smith."}],[{"start":360.76,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794528655_2540.mp3"}