Nvidia’s $250 Billion OpenAI Bet Is Raising AI Bubble Fears

Nvidia is in talks to provide a $250 billion guarantee to back OpenAI’s debt financing for a 10-gigawatt data center in Pike County, Ohio. The Wall Street Journal broke the story on Sunday. CNBC confirmed the details independently. Neither Nvidia nor OpenAI has commented publicly.

The structure matters. This is not an equity investment or a straightforward purchase. Nvidia would act as a credit backstop — letting OpenAI raise debt on Nvidia’s balance sheet to lease the facility, which is being built by SB Energy, a SoftBank subsidiary, on a federal site managed by the US Department of Energy. The $250 billion covers only the lease and debt financing. The AI server racks inside the center are worth another $350 billion, and Nvidia is reportedly in separate talks to finance those too.

The first phase of the project delivers around 800 megawatts of power by 2028. The site’s power supply runs through a $33 billion US-Japan trade deal, under which Tokyo is funding a natural gas plant on the same grounds in exchange for lower US tariff rates.

The Circular Financing Problem

Aleksandar Tomic, associate dean at Boston College, did not hold back. “What is happening right now with OpenAI and others is that they have the need for computing, but apparently they don’t really have the revenue or the financial capability to engage in the capital expenditures necessary to support their activities,” he told Al Jazeera. “Nvidia steps in and provides some funding so they can continue buying Nvidia chips. Where the demand for the whole chain is coming from or where the money is coming from becomes a really big issue.”

The arithmetic behind that critique is not trivial. AI infrastructure spending has surged across every major tech company simultaneously, but Nvidia’s own track record with OpenAI tells a specific story. In 2025, Nvidia pledged $100 billion to OpenAI for data centers that would run Nvidia chips. In early 2026, it added another $30 billion. Now $250 billion — potentially $600 billion in total exposure — sits on the table.

Tomic draws the 1999 comparison directly: companies bought each other’s products, inflated apparent demand, and the underlying economics only became visible when the money stopped moving. “The demand is not as big as it appears to be because the companies are buying from each other, using their own money to some degree, as opposed to OpenAI having tremendous customer demand, monetising it properly and then using customers’ money to buy Nvidia chips. They’re essentially using Nvidia’s money to buy Nvidia chips.”

The Counterargument

Michael Monaghan, founder of Founder’s ETF, pushed back on the circularity framing. “Like a lot of things in life, there is a downside or upside spin,” he said. “That’s not necessarily circular financing. That’s just an economy.” His point: every supply chain involves participants buying from each other. The question is whether end-user demand ultimately justifies the capital. Monaghan believes it does.

OpenAI is valued at $852 billion, though concerns about AI sector valuations have surfaced repeatedly through 2026. The company is still unprofitable. Its partners — the firms supplying data centers, chips, and processing power — collectively held around $96 billion in debt as of late 2025. The new deal, if confirmed, would push total commitments into territory well beyond any single tech infrastructure bet in history.

Nvidia’s stock dropped 4.9 percent in midday trading Monday following the report. The company’s shares are still up 4 percent year-to-date, 11 percent over twelve months, and 908 percent over five years. A single day’s dip in the context of that run reads differently than it might for a company without Nvidia’s balance sheet strength — a GF Score of 95/100 and a 9/10 financial strength rating.

Why This Deal Exists At All

OpenAI has historically leased compute from Amazon, Oracle, and Microsoft rather than owning its infrastructure. The Ohio facility would change that. A 20-year lease, reported by The Information in June, would give OpenAI direct control over its own equipment and payment of its own facilities — ending its dependence on the hyperscalers that also compete with it.

But that independence comes at a cost only Nvidia can currently underwrite. The data center financing market is enormous but has limits. SB Energy needs debt financing to build. OpenAI needs a credible guarantor to access that debt. Nvidia is the only player whose credit and strategic interest align well enough to take that position. Tomic’s question — “Why is this even necessary?” — is pointed, but the structural answer is simply that OpenAI cannot yet fund its own ambitions from its own revenue.

US Commerce Secretary Howard Lutnick confirmed that Microsoft, Google, and Anthropic are also eyeing space in the Ohio facility. Chip demand from that cluster of customers would be staggering. That underlying demand is what Nvidia is betting on when it agrees to backstop the lease.

The Political Overhang

There is a complication the financing math does not capture. Data centers have become a political liability across the US. New York passed a one-year moratorium on new data center construction in mid-July — the first state to do so. At least a dozen others have proposed similar legislation. In Utah, a state Senate president lost his Republican primary after backing a data center project. Texas Governor Greg Abbott called for a ban on rural data center construction in late June.

A Gallup poll found that 71 percent of Americans oppose data center construction in their area. That number gives political candidates an incentive to run against the industry regardless of party. The Ohio project sits on a federal DOE site, which insulates it somewhat from state-level legislation. But the broader political climate creates uncertainty for the industry’s next wave of projects.

Monaghan is relaxed about it. “I don’t know if there’s a major historical precedent for undoing something that large once it’s completed,” he said. “I don’t think there’s a lot of regulatory risk.”

Frequently Asked Questions

What exactly is Nvidia guaranteeing in the OpenAI deal?

Nvidia is in talks to provide a $250 billion credit guarantee that would allow OpenAI to raise debt financing for leasing a 10-gigawatt data center in Pike County, Ohio, built by SoftBank’s SB Energy subsidiary. The guarantee covers the lease and associated debt — not the Nvidia chips inside the facility, which are separately valued at up to $350 billion.

Why does OpenAI need Nvidia to backstop its debt?

OpenAI remains unprofitable despite its $852 billion valuation and has historically relied on cloud infrastructure from Amazon, Oracle, and Microsoft rather than owning its own. To secure a 20-year lease on this scale, it needs a creditworthy guarantor. Nvidia’s balance sheet and strategic interest in locking in chip demand make it the logical candidate.

What is the total potential cost of the Ohio AI data center project?

The full project could exceed $500 billion once chip costs are included. The $250 billion lease guarantee plus a potential $350 billion in chip financing would put Nvidia’s total exposure at $600 billion. The facility’s power supply is funded separately through a $33 billion US-Japan trade agreement covering a natural gas plant on the same site.

Could the political backlash against data centers affect this project?

The Ohio facility sits on land managed by the US Department of Energy, which gives it more federal protection than a privately sited project. But the political climate is hostile: New York has already passed a data center moratorium, and polls show most Americans oppose local data center construction. Future phases of the project, and the broader build-out, face a more contested regulatory environment than the infrastructure boom of 2024 or 2025.