What's ahead for AI financing after Nvidia CEO Huang departs
Huang's exit puts Nvidia's role as the AI trade's financier under scrutiny, from $36 billion in cloud backstops to CoreWeave's distressed bonds — and analysts disagree on what changes next.
The financier at the center of the AI trade
Jensen Huang stepped down as Nvidia chief executive on Thursday, after 33 years building the company he co-founded into the engine of the artificial intelligence boom. Chief financial officer Colette Kress was named interim chief executive while the board searches for a permanent successor.
Nvidia does more than supply the graphics processors at the heart of the boom. It also provides financing to other companies to help the industry expand, and Huang's departure puts that role under scrutiny. Goldman Sachs said it expects the company to honor its announced commitments, but negotiating new multi-party investments at the same scale may get harder.
The numbers behind the worry
Nvidia had $36 billion in off-balance-sheet AI cloud agreements, or backstops, for neoclouds, according to its last quarterly filing in July. CoreWeave, Nebius and IREN are all in Nvidia's portfolio, and their shares fell sharply on Thursday.
By mid-morning on Friday, CoreWeave was down 10.8% and Nebius 12.1%, Reuters reported, while Advanced Micro Devices was down 10.2% and Broadcom 6.7%. CoreWeave's 9.75% bond due in 2031 yielded 14.79% on Friday, after climbing to 16.7% last week, and the spread on its five-year credit default swap dropped more than 17% week to date but stayed above 1,000, a level generally seen as a sign of distress. Nvidia's own 4.5% bond due in 2031 yielded 5.717% on Friday, nearly 5% higher week to date, and the Nasdaq 100 closed down 1.2%. Nvidia shares closed at $162.85, down 2.01%.
Nscale, a British cloud provider backed by Nvidia, amended its IPO filing to say it expects a net loss of $1.7 billion in the nine months ended September 30, wider than the $433.3 million net loss a year earlier. Yardeni Research noted Nvidia bought more than $42 billion in equity securities in the first half of its fiscal year, compared with about $1.2 billion a year earlier.
Two views of what comes next
CreditSights analyst Andy Li said it remains unclear how Nvidia's support for those companies may change. He said that with Huang gone, the creative deal-making and circular financing that defined the boom is likely to moderate. 'We don't know what the ultimate strategy for Nvidia is going to be coming out the other side,' he said.
Ed Yardeni, president of Yardeni Research, called Nvidia the 'central bank of the AI trade' and said its departure could slow or halt that financing. But his base case is that the strategy stays intact: 'We expect the investment boom to continue without Huang.' CoreWeave chief executive Michael Intrator said Nvidia 'is not one person,' and pointed to thousands of people working together across the two companies.
Bob Lang, founder of Explosive Options, said he sees no big changes for now, noting Kress was involved in the financing deals as chief financial officer. The real question, he said, is how much money Nvidia will want to lend, rather than using its cash for share buybacks, capital spending or acquisitions. 'Big companies like Nvidia and Meta, they're holding all the cards,' he said. 'You have no idea what to expect from Nvidia. That's the problem. This company is pure uncertainty right now,' said Steve Sosnick, chief market analyst at Interactive Brokers.
- $36 billion in AI cloud backstopsNvidia's off-balance-sheet agreements for neoclouds
- $42 billionEquity securities bought in the first half, vs $1.2 billion a year earlier
- 14.79%Yield on CoreWeave's 9.75% bond due in 2031 on Friday, after 16.7% last week
- Above 1,000CoreWeave's five-year CDS spread, down more than 17% week to date
- 5.717%Yield on Nvidia's 4.5% bond due in 2031, nearly 5% higher week to date
