Nvidia cuts proposed OpenAI Ohio data center guarantee from $250B to under $120B
- Nvidia is expected to guarantee less than $120 billion for the first phase of OpenAI's proposed Ohio data center, down from $250 billion discussed earlier, the Wall Street Journal reported.
- Nvidia and OpenAI are nearing an agreement that could be signed as early as the weekend, but Nvidia would backstop only the initial phase after investors raised concerns about its financing exposure.
- OpenAI is still negotiating a binding lease for the full 10-gigawatt Ohio project, which SB Energy, a SoftBank subsidiary, is developing and which would be the largest announced data center project if completed.
- Nvidia recently joined six financial institutions to create compute-financing platforms intended to raise more than $500 billion in third-party capital for AI infrastructure.
- The project is part of OpenAI's push to own AI infrastructure, though its ability to fund such commitments faces scrutiny because it remains unprofitable despite an $852 billion valuation.
Hacker News opinions
I want to see the numbers. If Nvidia sells $100B of hardware at a 75% gross margin and backstops $50B, it still clears $25B even if the guaranteed capacity becomes a total write-off. Pension funds, sovereign wealth funds, and SoftBank in the $500B financing pool look more exposed.
Nvidia may simply have better buyers than OpenAI. A 25% margin is fine, but selling the same capacity at a 50% margin is better.
I am more worried about SoftBank and Oracle. They have put much more of their companies' wealth behind this, while others have insulated themselves from the downside.
The issue is the circular AI-financing structure and profits that depend on it. The capital cycle can continue for a while, but leverage is what turns this kind of arrangement into a systemic problem.
This guarantee was never signed in the first place. The DOE has published material on it, and reports put the entire Ohio campus at up to $500B.
The scale is hard to describe. A 10 GW project could raise Ohio's total electricity consumption by more than 50%, on top of major new generation, and the plan projects 2,500 permanent jobs in a county of 27,000 people.
I think Nvidia wants GPUs to become an asset class backed by a broad financing market. That is risky because GPUs depreciate quickly and are difficult to repair.
Nvidia is starting to look like a savings and loan company that designs chips on the side. The GPU could become the promotional gift for opening a large enough financing account.
If an open-weights model matched Opus 5 on an RTX 5070, the market would dip, but most people would not immediately self-host. AI providers with existing compute could serve that model cheaply, and Nvidia might sell far more consumer GPUs.
I doubt a frontier-equivalent local model will run on an RTX 5070 within five years. Training remains expensive, and inference-time scaling rewards whoever has the most compute.
Even if consumer hardware eventually runs today's frontier models, workloads will expand. Local capabilities that seemed extraordinary in 2022 are already ordinary, while the frontier moves ahead.