Nvidia has found a new way to boost sales. Why might this be a "red flag"?
The chipmaker acts as a guarantor for loans to non-cloud providers, helping them purchase processors while circumventing the banks' strict requirements
The new program helps non-cloud companies secure financing for the purchase of Nvidia chips that they would not otherwise have received / Photo: alexgo.photography / Shutterstock.com
Nvidia has found a new way to boost sales of its artificial intelligence chips. Recently, the company began acting as a guarantor on loans for small, specialized cloud providers that have difficulty obtaining traditional financing from banks. This arrangement will allow them to purchase more AI chips, according to Business Insider.
How the new scheme works and who benefits from it
The scheme works like an insurance product: if a customer of a non-cloud provider who leases computing power from that provider for AI stops paying, Nvidia assumes responsibility for repaying the debt. In return, the provider shares a portion of its revenue with the chipmaker.
The new program helps non-cloud companies secure funding they wouldn’t otherwise receive, while Nvidia is able to expand its customer base beyond the largest cloud providers—Amazon, Microsoft, and Google—many of which are developing their own competing AI chips.
Who has taken advantage of the new program?
The first publicly disclosed participant in the program was GMI Cloud, an Asian neo-cloud provider. Its founder and CEO, Alex Ye, told Business Insider that GMI Cloud had been in talks with Fireworks AI, a startup developing artificial intelligence, which wanted to lease computing power worth hundreds of millions of dollars. However, banks refused to finance the purchase of the necessary chips for this contract because Fireworks lacked an investment-grade credit rating. Earlier this year, GMI Cloud approached Nvidia, and the companies began discussing a new financing model. As a result, GMI Cloud became one of the first non-cloud companies in Asia to take advantage of this model. According to GMI Cloud, it will spend $500 million to expand its infrastructure under the new model.
In addition to GMI Cloud, cloud providers Firmus and Sharon AI are among the first participants in the program that Nvidia announced in July, according to Business Insider. James Manning, co-founder and CEO of Sharon AI, described the agreement as a shift from one-off transactions to a long-term partnership.
Context
The new model mirrors the structure of Nvidia’s existing partnerships, in which the company acts as both an investor and a supplier, notes Business Insider. The best-known example is the chipmaker’s relationship with AI infrastructure provider CoreWeave. In 2025, Nvidia signed a $6.3 billion contract with CoreWeave, under which it committed to purchasing the provider’s unsold cloud capacity through 2032. Nvidia also holds a stake in CoreWeave.
Such schemes have already drawn criticism as an example of so-called circular financing—where Nvidia effectively provides capital that is then returned to it in the form of revenue from chip sales. This criticism is valid only under one condition: if the funding creates demand that isn’t backed by actual paying customers, says Arman Aleksanyan, co-founder and CEO of the neo-cloud company Eleveight AI, which is not participating in the program.
"Circular financing is dangerous only when it creates demand that doesn't actually exist," he told Business Insider.
Brad Gastirt, head of research and market analytics at Circular Technology, called the new financing model sensible, but warned that it could be a “yellow flag” for investors (a yellow flag in Formula 1 signals danger to drivers). The key question is how selectively Nvidia will choose its partners to limit its own financial risks, he emphasized.
This article was AI-translated and verified by a human editor
