NVIDIA Plays Dual Role as Investor and Supplier in $35 Billion AI Deal, Reviving 'Circular Financing' Concerns

Anthropic has signed a $35 billion cloud computing agreement with cloud services provider Lambda, but the real focus of the deal isn't the amount—it's NVIDIA's (NVDA-US) presence across multiple layers of the transaction, which has reignited market concerns about 'circular financing.' NVIDIA shares fell 1.51% on Tuesday (1st) to $217.44 per share.

The transaction can be broken down into three layers. First, Anthropic purchases cloud computing services from Lambda, with both Anthropic and Lambda having received investments from NVIDIA. Second, the data centers used by Lambda to deliver these services are leased by NVIDIA from infrastructure developer Hut 8. Third, these data centers will be equipped with AI chips manufactured by NVIDIA.

In essence, an AI company funded by NVIDIA pays a cloud provider also backed by NVIDIA for services; that cloud provider operates in data centers leased by NVIDIA, which run on NVIDIA's own chips. NVIDIA thus simultaneously acts as investor, chip supplier, and leaseholder—making the entire ecosystem of funding, computing demand, and hardware procurement revolve around NVIDIA.

This structure raises 'circular financing' concerns because NVIDIA isn't just selling chips; it's also using investments and lease commitments to support customers in building AI infrastructure, thereby indirectly fueling demand for its own products.

NVIDIA executives explicitly stated in their latest earnings call that they do not accept the term 'circular financing' to describe how the company uses its balance sheet.

The Barron's指出 that this strategy isn't inherently problematic. By leveraging its massive cash flow to support the AI industry, NVIDIA ensures long-term demand for its processors while also benefiting from the rising valuations of its portfolio companies—all while maintaining relatively limited financial risk.

NVIDIA's latest quarterly report shows $20 billion in data center lease commitments to unnamed third parties, with $17 billion of that not maturing until fiscal year 2032 or later. NVIDIA expects to eventually transfer these lease obligations to third parties who will actually use the data centers. Given NVIDIA's market capitalization of over $5 trillion, this exposure is relatively small.

However, several key financial terms remain undisclosed, including how much Lambda will pay to use the data centers leased by NVIDIA, and whether Lambda will share any revenue from the Anthropic contract with NVIDIA.

These details will be crucial in determining whether the transaction represents normal industry investment or indirect self-funding of NVIDIA's chip demand.

The Anthropic deal is just one part of NVIDIA's broader strategy to expand its AI ecosystem.

In recent months, NVIDIA has secured minority stakes or investment options in Corning (GLW-US), Marvell (MRVL-US), Lumentum, Coherent, CoreWeave (CRWV-US), Nebius, Synopsys, Nokia, and MediaTek. It also holds significant stakes in Intel (INTC-US) and SpaceX, and has invested in dozens of private companies.

Barron's argues that to dispel circular financing concerns, NVIDIA must go beyond denying the label and instead disclose the lease terms, payment structures, and revenue-sharing arrangements among the involved parties.