# Nvidia Circular Financing Explained: How Dire Is It? > Nvidia has about $530 billion in supply deals, partner agreements and guarantees on its books, $279 billion of it mostly memory. Where the risk sits. Source: https://capitalandcompute.net/blog/nvidia-circular-financing-explained/ Published: 2026-11-14 Updated: 2026-11-14 Nvidia’s circular financing is the money it puts behind the companies that buy its chips: equity stakes, cloud deals it promises to rent back, and a guarantee of up to $105 billion on OpenAI’s Ohio data center leases. Its July 10-Q shows about $530 billion of commitments and guarantees, $279 billion of them supply contracts “primarily related to the procurement of memory.” That is the “avalanche” Jensen Huang described in an August meeting, as reported by The Wall Street Journal on November 13, two days after Nvidia’s board accepted his resignation. It is dire in one specific way: Nvidia has promised to buy and backstop hardware on the assumption that a small group of customers keeps buying. It is not, on the evidence in the filings, channel stuffing or a hidden fraud. This piece maps where the money goes, what breaks if demand cracks, and what it means for RAM and GPU prices. Status, November 14 2026 Nvidia reports third-quarter fiscal 2027 results on November 17, the first call under interim CEO Colette Kress. Every Nvidia figure below is from the quarter ended July 26 2026 (its latest 10-Q). The internal-meeting details come from one Wall Street Journal report citing unnamed people; Nvidia has not commented on them. This post will be updated after the call. Key takeaways * Nvidia's supply commitments jumped from $119 billion to $279 billion in one quarter, mostly memory. That is the pile Huang reportedly called an "avalanche." * Its largest single backstop is a guarantee capped at $105 billion on 20-year OpenAI leases at an Ohio campus that must exclusively host Nvidia hardware. The Journal reports Kress halved the original commitment. * In the first half of fiscal 2027 Nvidia spent $42.4 billion buying equity stakes, about 24 cents of every revenue dollar, and booked $23.7 billion of gains on its stakes. * Receivables rose to $63.1 billion and days sales outstanding to 60 from 45, because Nvidia gave large buyers up to a year to pay. That is disclosed vendor financing, not channel stuffing. * No near-term relief for RAM buyers: the memory Nvidia locked up is data center memory, and TrendForce still sees PC DRAM contract prices up 13–18% this quarter. Relief comes only if AI demand actually breaks. ## What is Nvidia’s circular financing? It is a loop. Nvidia invests in, lends credit to, or guarantees the debts of an AI company or cloud provider. That company uses the money, or the cheaper borrowing the guarantee buys, to purchase Nvidia systems. Nvidia books the sale as revenue, and the profit funds the next round of investments. The term “circular” is the critics’ word, and Kress has rejected it. “We recognize the scale of this support, and we know some will call this circular financing. We see it differently,” she said in late August, as quoted in the [Journal’s November 13 report, _Before His Ouster, Jensen Huang Belittled the Executive Replacing Him_](https://www.tovima.com/wsj/before-his-ouster-jensen-huang-belittled-the-executive-replacing-him/) (syndicated by To Vima). “The equity returns on our invested capital will be excellent.” Vendor financing is not new or illegal. Carmakers lend to car buyers and aircraft makers guarantee airline debt. The question is scale and concentration: how much of the buyer’s demand exists only because the seller is paying for it, and how few buyers the seller depends on. Nvidia’s own [Form 10-Q for the quarter ended July 26 2026](https://www.sec.gov/Archives/edgar/data/0001045810/000104581026000075/nvda-20260726.htm) answers both questions better than any commentary does. ## How big is Nvidia’s circular financing? About $530 billion of commitments and maximum guarantee exposure, on Nvidia’s own disclosures. The 10-Q lists $366 billion of future commitments: supply and capacity, cloud service agreements, data center leases, equity investments and capital spending. [Nvidia’s CFO commentary for the same quarter](https://www.sec.gov/Archives/edgar/data/1045810/000104581026000073/q2fy27cfocommentary.htm) adds a second table of $56 billion (AI cloud agreements and third-party data center leases) and a guarantee table with a maximum gross exposure of $108.5 billion. Not all of it is circular. Buying memory from SK hynix is ordinary supply chain. But every line rests on the same assumption: that AI compute demand keeps growing on Nvidia hardware. __What Nvidia has committed to buy or backstop (USD billions, July 26 2026)__ | Item | Value | | ------------------------------------ | ----- | | Supply and capacity (mostly memory) | $279B | | OpenAI Ohio lease guarantees (cap) | $105B | | AI cloud partner agreements | $36B | | Cloud service agreements | $29B | | Equity investment commitments | $25B | | Own data center leases not started | $25B | | Data center leases for third parties | $20B | | Capital expenditure commitments | $8B | | Other AI cloud lease guarantees | $3.5B | Nvidia's disclosed commitments and maximum guarantee exposure as of July 26 2026, in billions of dollars. The two largest lines, memory-heavy supply contracts and the OpenAI Ohio guarantee cap, are about 72% of the roughly $530 billion total.Source: [NVIDIA Form 10-Q and CFO Commentary, quarter ended July 26 2026](https://www.sec.gov/Archives/edgar/data/1045810/000104581026000073/q2fy27cfocommentary.htm) The pieces that make it circular, rather than just big: | Arrangement | Amount | Who benefits | How the money loops back | | ---------------------------------- | ----------------- | -------------------------------------------- | ----------------------------------------------------------------------------------------- | | SB Energy / OpenAI Ohio guarantees | Up to $105B cap | OpenAI, as tenant of a 4.25 GW campus | The campus must host Nvidia AI infrastructure exclusively, subject to limited exceptions | | AI cloud partner agreements | $36B | Neoclouds that buy Nvidia systems | Nvidia rents back their capacity for six years and can share revenue from their customers | | Equity purchases (first half FY27) | $42.4B spent | AI labs, clouds, “infrastructure financiers” | Portfolio companies are Nvidia customers; Nvidia books their valuation gains as income | | Extended payment terms | 90 days to 1 year | Investment-grade buyers of large builds | Nvidia carries the receivable, so the buyer does not have to fund the chips up front | | $500B financing platforms (MOUs) | Target, not money | Customers of six large capital providers | Nvidia may add “limited residual-value support” on specific projects | The Ohio deal is the clearest case. In its [August 17 Form 8-K](https://www.sec.gov/Archives/edgar/data/1045810/000104581026000069/nvda-20260817.htm), Nvidia disclosed residual value guaranties to SB Energy, the landlord, covering roughly 4.25 gigawatts of leases to an OpenAI affiliate. If OpenAI becomes insolvent or stops paying, Nvidia pays the shortfall between a guaranteed minimum lease value and whatever the landlord recovers by re-letting or selling, up to $105 billion. In return, the site exclusively hosts Nvidia hardware. Nvidia’s CFO commentary spells out the payoff it expects: each generation of hardware deployed there “could represent approximately 1.5 million NVIDIA GPUs, or approximately $150 billion to $200 billion in NVIDIA revenue.” Nvidia guarantees the customer’s rent so the customer can buy Nvidia’s chips. That is the loop in one sentence. The neocloud agreements work the same way at smaller scale. The 10-Q says AI clouds “procure our data center infrastructure products and we commit to cloud service agreements,” typically six years long, totaling $36 billion. Nvidia’s commitment shrinks as third parties rent the capacity instead. For how one of those partners makes money, see [what CoreWeave does](/blog/what-does-coreweave-do/); for the wider financing stack behind data centers, see [AI data center financing in 2026](/blog/ai-data-center-financing-2026/). ## What did Jensen Huang mean by an “avalanche” of wafers and memory? He meant the supply Nvidia had promised to buy. According to the [Journal’s report by Anissa Gardizy and Robbie Whelan](https://www.tovima.com/wsj/before-his-ouster-jensen-huang-belittled-the-executive-replacing-him/), Huang summoned his finance team in August because Nvidia “was in talks to provide billions of dollars of guarantees to companies that couldn’t afford its chips.” He told them major cloud providers “were running away from Nvidia, making plans to use alternative chips,” and that “the vast supply of chip wafers and memory Nvidia had committed to buying were coming at him like an ‘avalanche.’” In the same meeting, the Journal reports, he called Kress “a deer in the headlights” and a “reporting CFO.” The filings show the avalanche in numbers. Nvidia’s supply commitments rose “from $119 billion last quarter to $279 billion, primarily related to the procurement of memory,” according to its [CFO commentary](https://www.sec.gov/Archives/edgar/data/1045810/000104581026000073/q2fy27cfocommentary.htm). The 10-Q schedules $92 billion of that for the rest of fiscal 2027, $87 billion for fiscal 2028 and $88 billion for fiscal 2029\. Raw materials inventory more than tripled in six months, from $3.8 billion to $11.3 billion. Nvidia says total inventory rose to $31.6 billion “as we prepare for the introduction of Vera Rubin in the third quarter.” The Journal’s other details are the spiciest in the story, and all rest on unnamed sources: * **The son-in-law program.** Huang’s son-in-law, Nico Caprez, promoted to vice president in January, and another vice president, Raj Mirpuri, told prospective partners in the spring that Nvidia could arrange credit-support deals “within a couple of weeks.” Dozens of companies lined up, and Nvidia asked for a cut of their revenue in exchange. * **The $250 billion backstop.** The Journal reported on July 26 that Nvidia was considering a $250 billion backstop for the Ohio campus, which OpenAI would fill with “around $300 billion worth of Nvidia chips.” Nvidia shares fell 5% the next day. Kress then reworked the deal and cut Nvidia’s initial commitment in half before the August 17 signing. * **The pause.** Nvidia paused some revenue-share credit deals in late August, and its staff told cloud companies that deals now went to the executive team and the board. * **The soup story.** By October, Huang was telling a table of cloud CEOs in Berlin about a soup vendor who refused to sell a second bowl so he could keep prices high and customers diverse. “You are not establishing the value of my products,” he told them. Nvidia has not commented publicly on the meeting. Treat the quotes as one newspaper’s reporting and the numbers above as Nvidia’s own. ## Is Nvidia channel stuffing? No credible evidence says so, and no major outlet has alleged it. Channel stuffing means shipping product to distributors or customers who have not really bought it, to pull revenue into the current quarter. The r/wallstreetbets thread that used the phrase was reading the Journal story, which does not make that claim. What the filings do show is aggressive but disclosed vendor financing, which can look similar from a distance: * **Receivables jumped.** Accounts receivable rose to $63.1 billion from $38.5 billion in January. Days sales outstanding rose to 60 from 45 in one quarter, which Nvidia attributes to “extended payment terms on large, multi-quarter agreements with certain investment-grade customers.” The 10-Q says those terms run “from 90 days up to one year.” * **Customers are concentrated.** Five direct customers held 22%, 14%, 13%, 11% and 10% of receivables at July 26\. One direct customer was 16% of second-quarter revenue. * **Cash lags profit.** Operating cash flow in the quarter was $24.1 billion against $59.7 billion of net income, because so much revenue is still owed. The difference from stuffing is that the buyers are real, investment-grade, and contractually bound, and Nvidia tells investors exactly what it is doing. The risk is credit risk, not fake sales: if a large buyer cannot pay or renegotiates, Nvidia waits longer or writes the receivable down. __Where Nvidia's balance sheet grew in six months (USD billions)__ | Item | Jul 26 2026 | Jan 25 2026 | | --------------------------- | ----------- | ----------- | | Stakes in private companies | $51.2B | $22.3B | | Stakes in public companies | $42.8B | $12.9B | | Accounts receivable | $63.1B | $38.5B | | Inventory | $31.6B | $21.4B | | Cash and debt securities | $56.6B | $49.7B | Selected Nvidia balance sheet lines, January 25 vs July 26 2026, in billions of dollars. Stakes in public and private companies grew by $59 billion in six months while cash and debt securities rose $6.9 billion.Source: [NVIDIA Form 10-Q, quarter ended July 26 2026, condensed consolidated balance sheet](https://www.sec.gov/Archives/edgar/data/0001045810/000104581026000075/nvda-20260726.htm) ## How dire is Nvidia’s circular financing? Serious, but not a crisis yet. Three numbers frame it. **1\. Promises dwarf cash.** Nvidia held $56.6 billion of cash and marketable debt securities at July 26, against roughly $530 billion of commitments and guarantees. That comparison overstates the danger, because the commitments are spread over years and Nvidia earned $117.3 billion of operating income in the first half alone. It understates something else: the commitments only make sense if revenue keeps growing. Nvidia guided third-quarter revenue to $108 billion, plus or minus 2%, in its CFO commentary. **2\. Part of the profit is the loop.** Nvidia’s “Other income, net” was $24.1 billion in the first half, of which $23.7 billion was gains on equity securities, according to the 10-Q. That is about 17% of pre-tax income. In the same half it spent $42.4 billion buying equity stakes, roughly 24 cents of every revenue dollar. When the companies it backs raise money at higher valuations, partly to buy Nvidia hardware, Nvidia records a gain. If those valuations fall, the gain reverses. **3\. The weakest buyers carry the most debt.** CoreWeave, a key Nvidia partner, reported third-quarter revenue of $3.66 billion, a net loss of $709 million and net interest expense of $846 million in its [Q3 2026 earnings release](https://www.sec.gov/Archives/edgar/data/0001769628/000176962826000461/coreweave3q26earningspress.htm), with about $46.9 billion of recourse and non-recourse debt on its balance sheet. CoreWeave also reports a $132.5 billion revenue backlog and raised its guidance, so demand is there today. But it carries that debt against a business that still loses money each quarter, and interest alone ate about 23% of third-quarter revenue. The stress test is simple to state. If AI compute demand keeps growing, the guarantees never trigger, the stakes appreciate and the memory gets used. If demand stalls, the guarantees, the receivables, the stake values and the supply contracts all go bad at the same time, because they all depend on the same customers. That correlation, not any single number, is what makes it dangerous. For the broader bubble debate, see [Is the AI bubble popping?](/blog/is-the-ai-bubble-popping/). ## Who gets hurt if Nvidia’s financing loop breaks? Almost everyone in the AI supply chain, in roughly this order: * **Neoclouds and AI labs.** CoreWeave-style clouds depend on cheap credit that Nvidia’s backing helps secure. OpenAI’s Ohio campus depends on a guarantee that exists only because Nvidia wants to sell the chips inside it. A pullback hits their borrowing costs first. * **Memory makers.** Most of the $279 billion is memory. Nvidia’s 10-Q notes that some supply agreements “may be cancelable, rescheduled, or adjustable” before firm orders. If Nvidia reschedules, SK hynix, Samsung and Micron lose the high-margin HBM orders their 2027 plans assume. Memory stocks fell again on the Huang news, and the sector was already off sharply in October on Chinese competition and oversupply fears. * **Index investors.** Nvidia peaked at $5.8 trillion in October, per the Journal. Anyone holding an S&P 500 or Nasdaq-100 fund owns a large slice of this exposure without choosing it. * **Gamers and PC buyers.** Indirectly, and later. See the next section. ## Will Nvidia’s excess memory make RAM and GPUs cheaper? Not soon. The memory Nvidia committed to is data center memory (HBM and server DRAM) that ships inside its systems, not the DDR5 kits on store shelves. Consumer prices are set by how much wafer capacity Samsung, SK hynix and Micron give to PC memory, and right now AI demand still wins that fight. TrendForce’s [November 11 2026 release](https://www.trendforce.com/presscenter/news/20261111-13303.html) forecasts PC DRAM contract prices rising 13–18% quarter over quarter in the fourth quarter, slower than before. It also says memory makers “tentatively plan cuts to PC DRAM supply in 2027” because of “robust demand from AI applications,” even as notebook shipments fell 15.8% in the third quarter and PC makers’ inventories pile up. The path to cheaper RAM runs through the scenario Huang feared. If cloud providers really do shift to their own chips and Nvidia reschedules its memory orders, the freed capacity eventually returns to consumer DRAM and GDDR, and prices fall. That would take quarters, not weeks. Track it on the [memory price tracker](/memory-prices/) and the [HBM page](/memory-prices/hbm/), and for gaming cards, the [GPU price tracker](/gpu-prices/). The background is in [why RAM and GPU prices are spiking](/blog/why-are-ram-and-gpu-prices-spiking/) and [signs the memory cycle is peaking](/blog/memory-cycle-peaking-2026/). ## What should you watch in Nvidia’s November 17 earnings? Five lines in the third-quarter filing will show whether the avalanche is growing or melting: 1. **Supply and capacity commitments.** Up from $279 billion means Nvidia is still buying ahead. Down means renegotiation, which hurts memory makers. 2. **Days sales outstanding.** Above 60 means more customers are paying late. 3. **Guarantees.** Any new backstop beyond the $108.5 billion maximum, or any exercise of the option on another 3.8 gigawatts in Ohio. 4. **Gains on equity securities.** How much of the quarter’s profit came from marking up stakes rather than selling chips. 5. **Inventory provisions.** Write-downs on excess inventory or purchase obligations, which Nvidia already took on China-bound H20 and H200 chips. For what the leadership change means beyond the money, see [Can Nvidia’s board fire Jensen Huang?](/blog/can-nvidia-board-fire-jensen-huang/) and [Can Jensen Huang sell his Nvidia shares now?](/blog/can-jensen-huang-sell-his-nvidia-shares/). ## Frequently asked questions What is circular financing in AI? It is when a supplier funds or guarantees its own customers so they can buy its products. In Nvidia's case that means equity stakes in AI labs and clouds, agreements to rent back their capacity, extended payment terms and a guarantee of up to $105 billion on OpenAI's Ohio data center leases. How much has Nvidia committed to its customers and suppliers? About $530 billion as of July 26 2026: $366 billion of future commitments in its 10-Q, $56 billion of AI cloud agreements and third-party leases, and $108.5 billion of maximum guarantee exposure. The largest piece, $279 billion, is supply contracts, mostly for memory. Did Jensen Huang resign because of circular financing? No reason was given in Nvidia's filing. The board accepted his resignation on November 11 2026 after reports about his personal relationships. The Wall Street Journal's account of his August clash with Colette Kress over financing deals was published two days later. Is Nvidia channel stuffing? There is no credible evidence of it. Receivables and days sales outstanding have risen because Nvidia gives large investment-grade customers up to a year to pay, which it discloses. That is credit risk, not fake sales. Will RAM prices drop because of Nvidia? Not in the near term. Nvidia committed to data center memory, and TrendForce still forecasts PC DRAM contract prices up 13–18% in the fourth quarter of 2026, with suppliers planning PC DRAM cuts in 2027\. Prices fall only if AI demand slows enough to free capacity. ## Sources * NVIDIA (2026). _Form 10-Q for the quarter ended July 26, 2026_. SEC. * NVIDIA (2026). _CFO Commentary on Second Quarter Fiscal 2027 Results_. SEC Form 8-K, Exhibit 99.2\. * NVIDIA (2026). _Form 8-K, Item 1.01 and 2.03: SB Energy residual value guaranties_ (August 17, 2026). SEC. * NVIDIA (2026). _Form 8-K, Item 5.02: resignation of Jen-Hsun Huang_ (November 12, 2026). SEC. * Gardizy, A. and Whelan, R. (2026). _Before His Ouster, Jensen Huang Belittled the Executive Replacing Him_. The Wall Street Journal, syndicated by To Vima. * CoreWeave (2026). _Third Quarter 2026 Results press release_. SEC Form 8-K, Exhibit 99.1\. * TrendForce (2026). _Mounting Finished-Goods Inventories Prompt Some PC OEMs to Adjust Memory Procurement Plans for 2027_. TrendForce press release.