Nvidia is in talks to guarantee billions of dollars in debt financing for Nscale’s planned Anthropic data center in West Virginia, The Information reported on Thursday, October 29, and Bloomberg later corroborated it. Under the structure described, the chipmaker would step in if the AI cloud provider defaulted on construction payments. The talks are reported, not announced, and neither company’s terms are public. The arrangement would effectively mean Nvidia is co-signing a customer’s loans, a sign of how hard the industry is working to keep its buildout financed as investors grow jittery.
How the guarantee would work
TechCrunch, summarizing The Information, describes a “residual value guarantee.” If Nscale failed to pay for construction, Nvidia would temporarily take over the facility and help find a buyer and a new tenant. The financing would cover the electricity and construction costs of the West Virginia campus.
This goes further than Nvidia’s earlier support for cloud providers, which has mostly covered leases and chip purchases rather than construction. Nvidia has extended roughly $170 billion in investments and credit support to so-called neoclouds and large customers, per The Information, including $1 billion in convertible financing committed to Nscale in September.
The Anthropic contract behind it
Anthropic signed a $44.6 billion contract for the campus’s first building alone, according to Nscale’s IPO filing. That building is a 460-megawatt facility expected to use Nvidia’s next-generation Vera Rubin chips. The companies are also discussing a second deal worth about $45 billion for another building. Anthropic is one of the largest buyers of AI computing power; our earlier report on the Anthropic prospectus describes the scale of its compute commitments.
Why Nscale needs help
Nscale is seeking to go public at a valuation of up to $35 billion, but TechCrunch notes growing concern about its ability to deliver. The company had about 25,000 advanced AI chips running in August, against a plan to deploy nearly 500,000. The West Virginia site has had problems of its own: runoff from construction has flooded nearby homes more than once, and the project won state certification only in September after months of negotiations.
There is also a power problem elsewhere. This month Microsoft pulled out of a planned Nscale site in England after grid power for it was pushed into the 2030s, which we covered in our report on Microsoft’s exit from Nscale’s Essex datacentre.
A circular-financing worry
A guarantee would deepen the ties between a chip supplier, its cloud customer and that customer’s own customer. Nvidia would help secure financing that lets Nscale build a facility full of Nvidia chips for a buyer, Anthropic, that is itself a major Nvidia customer. Supporters would say this is ordinary vendor financing in a capital-intensive industry. Critics worry it spreads risk in a way that can amplify losses if demand softens. Our explainer on how SpaceX’s GPU lease was financed covers a similar structure.
The market backdrop is shaky. CNBC reported that shares of CoreWeave, Nebius and IREN each fell more than 30% in October as of last week. On Friday the Nasdaq dropped 2.9%, and TechCrunch writes that investors are increasingly worried about negative free cash flow and debt at companies that plan more than $740 billion in capital spending.
What to watch next
- Whether Nvidia and Nscale announce a formal guarantee and its size.
- Nscale’s IPO pricing and how investors treat the delivery risks.
- Progress on the second roughly $45 billion building Anthropic is discussing.
- How many Nscale chips are online against the 500,000 planned.
- Whether other chipmakers copy Nvidia’s credit support for customers.
Key takeaways
- Nvidia is reported to be in talks on a residual value guarantee for Nscale’s West Virginia debt.
- Anthropic’s first-building contract is worth $44.6 billion for 460 megawatts of Vera Rubin capacity.
- Nscale ran about 25,000 chips in August versus a plan of nearly 500,000.
- Nvidia has extended roughly $170 billion in investments and credit support to neoclouds and big customers, per The Information.
- Nothing is final; the report rests on The Information, with Bloomberg corroborating.
Frequently asked questions
What is a residual value guarantee?
It is a promise to cover a shortfall if an asset is worth less than expected or the borrower defaults. Here, Nvidia would take over the facility temporarily and help find a buyer and tenant.
Who is Nscale?
Nscale is an AI cloud provider, or neocloud, that rents out computing power. It plans a West Virginia campus for Anthropic and is seeking an IPO at a valuation of up to $35 billion.
Has Nvidia confirmed the deal?
Not in the sources we reviewed. The Information reported the talks and Bloomberg corroborated them, but no final terms have been announced.
