Wall Street Is Obsessing Over Nvidia's $105 Billion Circular Financing Structure With OpenAI. Here's the More Important Deal No One Is Talking About.

Nvidia (NASDAQ: NVDA) sits at the center of two very different bets on artificial intelligence (AI) infrastructure. One side of the equation is loud and already consumes Wall Street's attention: a deepening commercial and financial partnership with OpenAI. The other side is quieter and much easier to miss: a reported agreement to acquire Hugging Face , a website where open-source AI models are published and shared.

The Nvidia-OpenAI relationship builds and fills AI factories. With Hugging Face, Nvidia can own something far more lucrative -- the marketplace where AI factories get their orders. Let's break down both deals and explore what's at stake for Nvidia investors.

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Nvidia's relationship with OpenAI bridges compute and credit

In February, OpenAI conducted a funding round that raised $110 billion at a $730 billion pre-money valuation. During that round, SoftBank and Nvidia each invested $30 billion, while Amazon committed $50 billion. More recently, SoftBank's SB Energy announced that it plans to build a data center at PORTS-Pike Technology Campus in Pike County, Ohio, and lease the facility to OpenAI.

The initial build-out plan covers 4.25 gigawatts of capacity, with an option for an additional 3.75 gigawatts. Nvidia will be the exclusive compute supplier as capacity comes online in 2028. According to an 8-K filing in late August, Nvidia entered into a series of residual value guarantees for up to $105 billion to help finance this infrastructure.

On the surface, this deal might look like a home run for Nvidia. But think about this for a minute: OpenAI needs graphics processing units (GPUs) from Nvidia to train its models. At the same time, OpenAI is hemorrhaging cash. So now, Nvidia is stepping in as a financier to bankroll OpenAI's infrastructure roadmap so that OpenAI can, in turn, buy more chips from none other than Nvidia. Unsurprisingly, Wall Street is skeptical of the mechanics, with some calling this financing arrangement too circular.

Nvidia CEO Jensen Huang and CFO Colette Kress both addressed this concern during the recent fiscal 2027 second-quarter earnings call. Huang described the arrangement with OpenAI as a way to lock in demand for Nvidia compute so OpenAI can build productive AI factories that can be "upgraded repeatedly." Kress went even further, saying that the downside risk from the OpenAI financing is limited because demand from frontier labs is so strong that they create entirely new businesses and ecosystems for Nvidia. She stated that "equity returns on our invested capital will be excellent."