Why Nvidia Stock Fell Today
Shares of Nvidia (NASDAQ: NVDA) sank on Monday following reports that the chipmaker was in discussions to guarantee financing for a colossal data center project.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
The costs of the AI buildout boom are mounting
Nvidia is in talks to provide a $250 billion financial guarantee for a 10-gigawatt data center project in Ohio, according to The Wall Street Journal.
One of Nvidia’s largest customers, artificial intelligence (AI) model builder OpenAI, is reportedly attempting to lease the site, which is being developed by a subsidiary of Japanese investment giant SoftBank.
Nvidia is also reportedly evaluating a separate deal to finance OpenAI’s purchase of its AI chips, which could amount to another $350 billion.
Red flags are waving
News of these potential financing deals is making investors increasingly uncomfortable.
So-called circular financing deals occur when a supplier helps its customers pay for goods or services that they might not otherwise be able to afford.
At first, these arrangements can boost the supplier’s sales. But over time, the supplier becomes increasingly tied to its customers’ fate.
That’s a legitimate concern for Nvidia and its shareholders. Despite its stunning growth, OpenAI remains deeply unprofitable. And competition among AI model developers intensifies by the day.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Why Nvidia Stock Fell Today was originally published by The Motley Fool