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PANDORA’S BOX
EVERYTHING GOT OUT. THE HOPE IS AT THE BOTTOM.
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THE ONE-WAY DOOR
Nvidia may guarantee the debt of its own biggest customer
OpenAI cannot get investment grade financing on its own. Nvidia is discussing a guarantee big enough to erase that problem for now.
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OpenAI cannot borrow like a blue chip. Nvidia is talking about fixing that anyway. The chipmaker is discussing a guarantee up to 250 billion dollars, tied to a data center OpenAI wants to build in Ohio.
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Here is the version that matters at your kitchen table. When a lender will not touch your loan on your own merit, someone else’s credit can step in. That makes weak credit look strong.
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Nvidia and Microsoft both sit inside almost every S&P 500 index fund, including the one in your 401(k).
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OpenAI does not have what is called an investment grade credit rating. That rating is what tells a bond buyer a company is safe enough to repay a loan on its own word.
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A guarantee from Nvidia would let lenders treat OpenAI’s debt as safer than it really is. The project could run past 500 billion dollars once built. A campus that size already pushes up electricity bills in nearby towns. Nvidia is also discussing financing up to 350 billion dollars of its own chips for the same buildout.
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Michael Burry, the investor famous for calling the 2008 housing crash, had four words for it: “Around and around we go.”
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He had just added to his bet against Nvidia stock three days earlier, on July 24.
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The lid is off.
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The last time a chipmaker financed its own customers at this scale was the telecom bust of 2000. Lucent and Nortel lent phone companies money to buy their own equipment. When the phone companies could not pay, the equipment makers took the loss too.
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Ed Zitron, a tech commentator, called the plan insane and asked where the money would actually come from. SoftBank is the company building the campus. Microsoft, Google, and Anthropic have all reportedly asked about space on the same site.
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EVERY LEAD PASSES BEFORE IT RUNS
The One-Way-Door Test
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Can it be undone?
Nothing is signed yet. But construction on the site already began in March.
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Who is already repositioning?
Michael Burry added to his Nvidia short this month. Ed Zitron and SoftBank are already arguing about who pays.
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What does being late cost?
No dollar figure is final. No rating agency has weighed in yet.
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THE MOVE · WHILE THERE IS STILL TIME
Watch Nvidia’s next quarterly filing for whether this guarantee shows up as a real liability, not a footnote. That filing will say more than any press release will.
A guarantee can sit off the balance sheet and still be completely real. If Nvidia calls it a footnote instead of a liability, the risk does not disappear. |
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ALSO GOT LOOSE TODAY
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The Pentagon paused a two-week bombing campaign against Iran on Thursday. Israel’s prime minister is due at the White House this week. |
WORLD |
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S&P 500 companies are on pace for 38 percent earnings growth this quarter, the fastest pace in years. Almost none of that growth talk mentions who is financing the chips behind it. |
MONEY |
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WHAT’S LEFT AT THE BOTTOM
Most people will not connect the word guarantee to their own grocery budget or retirement account. You already know the one filing that will say whether this risk is real. WE WATCH THE BOX.
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