A quarter of Nvidia’s business next year comes from labs it is financing

Nvidia has put nearly US$50 billion into the AI labs that buy its chips, and has lined up commitments for more than $500 billion

Colette Kress, the company’s chief financial officer, told analysts on August 26 that demand from the labs Nvidia backs with its own balance sheet will contribute toward roughly a quarter of its business next year.

That arrangement is what people mean by circular financing, and Nvidia used the phrase before any analyst did. Kress said on the earnings call that the company recognised the scale of the support it was providing and knew some would call it circular financing. She said Nvidia sees it differently.

The loop is simple to describe. Nvidia invests in an AI lab. The lab uses the money, or the credit Nvidia’s involvement unlocks, to build a data centre. The data centre is filled with Nvidia chips. The purchase is recorded as Nvidia revenue. Nvidia’s share price and cash pile grow, and it invests again.

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