Analysis: Nvidia's crisis tests the AI financing system it helped build
Nvidia's leadership crisis is testing the web of AI financing it built, as credit markets show stress at neoclouds while the IMF and the Fed watch leverage.
The 'central bank of AI'
Nvidia has become so central to financing the artificial intelligence boom that some call it the "central bank of AI." The chipmaker has committed to buy up to $36 billion in cloud services from neoclouds, smaller firms that build data centers with Nvidia chips and lease capacity to others. It also pledged phased backing of $105 billion for a major data center project in Ohio planned by OpenAI and SB Energy, and promised to backstop up to $125 billion of a $500 billion credit program run by Wall Street firms.
Columbia Business School professor Stijn Van Nieuwerburgh estimates the commitments at $400 billion in total. Nvidia's market value stands at roughly $3.9 trillion, even after its stock fell 33% from its October 6 peak through Thursday morning. The obligations come in different forms and are unlikely to come due all at once, if ever.
Stress is showing in neocloud credit
The strain is visible in the credit markets. The cost of insuring CoreWeave's debt, measured by credit-default spreads, rose 94% from October 1 to November 5, nearly doubling, before settling, according to LSEG data. The price of an IREN convertible bond maturing in 2029 fell 23% from November 3 to November 5, while the company's share price fell 26%.
Nvidia has not disclosed its specific partners, but CoreWeave and IREN have separately disclosed their relationships with the chipmaker. In the past few days, most neocloud shares have recovered as Nvidia's stock has fallen, suggesting investors see the problems as specific to Nvidia for now. Reuters reported that AI-linked stocks fell on Thursday as the crisis deepened, and that Nvidia's market value had dropped below $4 trillion for the first time since July 2025.
- Cloud services commitmentUp to $36 billion
- Ohio project backing$105 billion
- Credit program backstopUp to $125 billion of $500 billion
- Total commitments, Van Nieuwerburgh estimate$400 billion
- Nvidia market valueAbout $3.9 trillion
The IMF and the Fed are watching leverage
Jason Wu, an assistant director at the International Monetary Fund who oversees its Global Markets Analysis unit, led a chapter of the fund's Global Financial Stability report published in October warning about growing leverage among AI firms and investors. The largest technology firms, known as hyperscalers, have grown from 1% of bond issuance in the $15 trillion investment-grade debt market to 10% in two years.
Hedge funds and retail investors have made risky bets riskier by borrowing to buy stocks or investing in funds with embedded leverage. Federal Reserve officials were already discussing in July the possibility of a broad-based repricing of assets if the AI sector ran into trouble, and the central bank is watching the buildout closely.
Why analysts say a 2008 rerun is unlikely
Analysts and current and former officials say a repeat of the 2007-2008 financial crisis is not likely. Sheila Bair, the former regulator who ran the Federal Deposit Insurance Corporation, said Nvidia is not "too big to fail in a bank sense at all," noting that unlike a troubled bank it is not vulnerable to a sudden loss of confidence and would still make a product customers want.
"Nvidia going down would be a pretty seismic event," Bair said, adding that regulators need to watch bank exposure carefully. Van Nieuwerburgh said: "I don't want to say it's a safe system, but I do want to say there's a lot of equity in the system right now." He added that central bankers "are clearly very, very, very anxious about this and thinking hard about these questions." Nvidia reports earnings on Tuesday, when analysts expect its revenue to more than double in the current fiscal year.
