From selling chips to renting data centers, Nvidia's $50 billion data center lease revealed

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Nvidia is betting on AI infrastructure at an unprecedented scale, but the resulting concerns in the credit market are rising in tandem.

According to a Tuesday report by the Financial Times citing five sources, Nvidia has signed leases worth up to $50 billion, making it a tenant at Hut 8's data center campus in Texas.

The day before this news was released, Nvidia’s share price plunged by nearly 5%, simultaneously losing its position as the world’s most valuable company; in the credit market, Nvidia’s five-year credit default swaps (CDS) saw the largest intraday surge since the contract became actively traded, reflecting heightened worries about Nvidia’s massive AI financing obligations.

A Nvidia spokesperson declined to confirm or deny the reported leasing agreement, only stating that the company is working with ecosystem partners through the DSX AI factory architecture to accelerate the deployment of efficient AI infrastructure. Hut 8 had not responded to Reuters’ request for comment at publication time.

$50 Billion Lease: Nvidia May Become Hut 8 Texas Campus’s Main Tenant

Last week, Hut 8 disclosed that its 1-gigawatt Beacon Point campus had signed a long-term agreement with a base term of 15 years and a base contract value of $19.6 billion, which could rise to $50.2 billion if all renewal options are exercised. Hut 8 didn’t reveal the tenant, only describing them as an “existing investment-grade client” who will deploy computing equipment at the campus to support large-scale AI training and operations.

The Financial Times, citing sources, identified Nvidia as the tenant. The report also indicated that Nvidia may sublease the property to its “neocloud” partners—these partners purchase Nvidia GPUs and sell AI cloud computing services to the market.

A Nvidia spokesperson said that DSX is the company’s full-stack architecture integrating its technology with partner equipment to design, build, and operate large-scale AI data centers.

CDS Soar to Record Highs, Credit Markets Sound Alarm on Circular Financing

Meanwhile, signals from Nvidia’s credit market are raising concerns. According to ICE Data Services, on Monday, Nvidia’s five-year CDS rose by about 14 basis points intraday, reaching around 82 basis points annually—a record move since the contract started actively trading in November last year.

This came as several major financing reports broke. Last week, Nvidia announced a plan with SK Hynix’s parent company valued at over $50 billion; in addition, Nvidia is reportedly negotiating to provide up to $25 billion in guarantees to OpenAI to help it lease U.S. data center computing power—potentially one of the largest financing transactions between the company and a client. Nvidia is also in talks to finance OpenAI’s $35 billion U.S. chip procurement project.

“The capital expenditure required to build AI infrastructure is enormous, and the debt market is being flooded by massive supply,” said Sal Naro, Chief Investment Officer at Coherence Credit Strategies. “Opaque, off-balance-sheet transactions and ‘financial alchemy’ driven by inter-company relationships are worrying and may lead to downgrades in credit ratings.”

Circular Financing Structure Sparks Market Debate

Critics have been warning for months about the circular nature of these deals: Nvidia provides financing or stakes to certain companies, which in turn often purchase or use Nvidia chips. The risk of such arrangements is that they may distort business incentives and lead to poor decision-making; if AI demand falls short, potential losses could be magnified.

It’s noteworthy that such financing often relies on investment-grade credit ratings, something fast cash-burning AI companies like OpenAI and Anthropic struggle to achieve on their own. Backing and support from large enterprises are key to allowing related AI infrastructure debt to obtain higher ratings.

“While Nvidia’s investments and partnerships are boosting confidence in the long-term construction of AI infrastructure, investors are still concerned about circular financing issues,” said Gary Tan, portfolio manager at Allspring Global Investments. “More and more capital is being used to fund future AI customers and infrastructure deployment.”

As Nvidia’s financial involvement in AI infrastructure continues to expand, the diverging trends between the credit and equity markets may become an important window for investors to assess the chip giant’s risk exposure.

Risk Disclosure and Disclaimer ClauseThe market involves risks, and investment should be undertaken cautiously. This article does not constitute personal investment advice nor does it take into account the specific investment goals, financial condition, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their own circumstances. Investment decisions are made at your own risk. ```