Wedbush: NVIDIA provides a "backstop" for OpenAI, which carries risks, but this is a long-term commitment worth betting on

According to earlier reports, NVIDIA (NVDA.US) is discussing providing up to $250 billion in credit guarantees to support OpenAI in leasing and constructing a massive AI data center park in Ohio. In response, Wedbush Securities pointed out in its latest report that while this move may bring additional risks to NVIDIA, it is overall a positive layout to strengthen the long-term strategic binding between the two parties.

It is understood that the core of this guarantee arrangement is to enable OpenAI to raise substantial debt funding using NVIDIA's creditworthiness to secure the lease and construction of a 10-gigawatt (GW) data center park in Pike County, Ohio. Insiders emphasized that the guarantee only covers lease and construction debt and does not include NVIDIA chips themselves—negotiations regarding chip supply and financing are being conducted separately. The site of the park was originally a uranium enrichment plant and is now being developed in collaboration with the U.S. Department of Energy by SB Energy, a subsidiary of SoftBank. It is estimated that the annual electricity consumption of 10 GW is roughly equivalent to the electricity usage of 8 million American households, and the total cost of the entire data center park may exceed $500 billion.

From NVIDIA's perspective, Wedbush analyst Matt Bryson wrote in a report to clients that such projects would "further solidify NVIDIA's connection with one of the world's leading frontier model developers," which helps mitigate competitive risks during a period when more foundry capacity may ultimately yield market share. However, he also issued a warning: "The revolving financing arrangement will inevitably create more risks for NVIDIA, as if AI demand slows or OpenAI falls behind competitors, NVIDIA may be exposed to customer operational issues."

Nevertheless, Bryson still believes that the ongoing emergence of large data center construction plans and NVIDIA's core position in these projects is positive for the world's largest AI accelerator and hardware supplier. He specifically mentioned that this project is likely to have garnered attention and "support" from the U.S. federal government, as "so far, cooperation with this (Trump) administration has been highly rewarding for chip companies."

Currently, the capital ties between NVIDIA and OpenAI are becoming increasingly tight. In September last year, NVIDIA stated that it would invest up to $100 billion in OpenAI as a strategic partner, provided that the latter deploys at least 10 GW of NVIDIA systems. Although this investment ultimately did not materialize, NVIDIA still contributed $30 billion in OpenAI's record financing round in March this year. Subsequently, NVIDIA CEO Jensen Huang stated that this "might be" the company's last investment before OpenAI goes public. In June of this year, OpenAI secretly submitted its initial public offering application to the U.S. Securities and Exchange Commission but has not yet disclosed a formal timeline. Currently, the valuation given to OpenAI by various private investors is approaching $1 trillion, betting on its ability to maintain a leading position in the AI field and find a sustainable business model—despite the ongoing threat to its pricing power from open-source models from China and elsewhere As a co-promoter of the project, SoftBank is also a major investor in OpenAI. Earlier this year, the two parties announced a $1 billion investment in SB Energy. The data center in Ohio is regarded as one of the most ambitious projects in the United States' AI infrastructure expansion. As the related financing negotiations progress, its final outline and the risk exposures of all parties may still change