At the center of the action is Nvidia, the world’s most valuable company. Companies that train and run AI systems, such as Anthropic and OpenAI, need Nvidia’s chips but don’t have the cash on hand to pay for them. Nvidia, meanwhile, has plenty of cash but needs customers to keep buying its chips. So the parties have made a series of deals in which the AI companies are effectively paying Nvidia by handing over a share of their future profits in the form of equity. The chipmaker has struck more than 50 deals this year, including a $100 billion investment in OpenAI and (with Microsoft) a $15 billion investment in Anthropic. Formally, these transactions don’t obligate the AI companies to spend money on Nvidia’s chips—an Nvidia spokesperson told Bloomberg that the company “does not require any of the companies we invest in to use Nvidia technology”—but in practice, that’s where the money goes. … Together, these arrangements amount to an entire industry making a double-or-nothing bet on a product that is nowhere near profitable. A single company, OpenAI, is simultaneously a major source of revenue and investment for several cloud companies and chipmakers; a close financial partner to Microsoft, Oracle, and Amazon; a significant customer for Nvidia; and a leading investor in AI start-ups. And yet the company is projected to generate only $10 billion this year in revenue—less than a fifth of what it needs annually just to fund its deal with Oracle. It is on track to lose at least $15 billion this year, and doesn’t expect to be profitable until at least 2029. … Meta has described its arrangement with Blue Owl as an “innovative partnership” that is “designed to support the speed and flexibility required for Meta’s data center projects.” But the reason the credit-rating system exists is to give lenders and investors a clear sense of the risk they are taking on when they issue a loan. A long history exists of companies trying to circumvent that system. In the run-up to the 2008 financial crisis, several major financial institutions used SPVs to keep billions of dollars in household debt off of their balance sheets. Enron, the energy corporation that famously collapsed in 2001 after a massive accounting scandal, used SPVs to mask its shady accounting practices. “When I see arrangements like this, it’s a huge red flag,” Paul Kedrosky, a managing partner at SK Ventures and research fellow at MIT who has written extensively about financial-engineering techniques, told me. “It sends the signal that these companies really don’t want the credit-rating agencies to look too closely at their spending.”
I meant his whole piece is amazing, but the specific look at how these companies are structuring the deals is what reeks to high heaven. Special “innovative” finance moves to keep debt off the books? The ‘we dont want cash just give us equity’ chip deals?! Nothing like a degenerate gambler saying ‘just a stutter step’.
Quote Citation: Rogé Karma, “Something Ominous Is Happening in the AI Economy - The Atlantic”, 2025-12-10, https://www.theatlantic.com/economy/2025/12/nvidia-ai-financing-deals/685197/