Nvidia relies on funded AI labs for quarter of next year business

Nvidia revealed in an earnings call on August 26, led by Chief Financial Officer Colette Kress, that demand from artificial intelligence laboratories backed by the company's own balance sheet will account for roughly a quarter of its business next year. This arrangement is widely termed circular financing, a phrase Nvidia acknowledged and used before any Wall Street analyst brought it up.

The financing loop is straightforward. Nvidia invests funds into an AI lab, which then utilizes the cash or unlocked credit to build a data center packed exclusively with Nvidia hardware. This equipment purchase is logged as Nvidia revenue, expanding the company's cash reserves and share price to fuel further investments.

Stock photo for illustration only, not from the actual event

Kress detailed that Nvidia has established partnerships with six major investment firms—Apollo Global Management, BlackRock, Blackstone, Brookfield Asset Management, Goldman Sachs, and KKR—to launch financing platforms targeting over $500 billion in outside capital for lab construction. Furthermore, Nvidia secured land, power, and building capacity through SB Energy dedicated entirely to Nvidia equipment, with the initial 4.25 gigawatt phase allocated to OpenAI. Kress estimated OpenAI's ongoing and future commitments at around 12 gigawatts through 2030, alongside nearly two gigawatts for a second, unnamed lab.

However, Nvidia's earnings statement notes that these partnerships remain subject to definitive agreements, meaning binding contracts are not yet finalized and the $500 billion figure represents an intention rather than secured cash. Nvidia is also providing credit backing to smaller cloud operators by guaranteeing rental income on a portion of their capacity, allowing lenders a secure repayment stream while Nvidia takes a share of earnings above that baseline.