Nvidia's $80 billion cash hoard and new $500 billion Wall Street partnerships create a self-reinforcing cycle, executives and analysts say. The chipmaker's financial might is becoming a moat of its own.
Nvidia had more than $80 billion in cash and marketable investments as of its April earnings report, and it generated another $50 billion in operating cash flow that quarter. The company now plans to bring in at least $500 billion of outside capital from Apollo, Blackstone, and Goldman Sachs to finance even more Nvidia-powered AI infrastructure.
"Where they're kind of unmatched is in the giant bag of cash they're sitting on top of," said Sha Rabii, cofounder of AI hardware startup Majestic Labs. Rabii spent years leading custom silicon inside Google and Meta before launching his own company.
Other Big Tech giants have comparable cash stashes. Nvidia does not shoulder the same massive data-center construction costs. Even after returning billions to shareholders, the company is left with a surplus.
"What better use of the rest of the cash to invest and grow and strengthen the ecosystem around their products?" said Stacy Rasgon, an analyst at Bernstein.
On Monday, Nvidia announced it is also in talks to guarantee an OpenAI data center project worth hundreds of billions of dollars. It is providing financial backstops to neoclouds – specialized AI cloud providers – to buy its graphics processing units. It is making long-term commitments to secure scarce components and investing in AI startups through its NVentures and Inception programs.
The result is a self-reinforcing cycle. Nvidia's technological dominance generates cash. That cash finances more chip sales, which in turn generate more cash.
"Nvidia's real moat today is how freaking expensive it is to build data centers," Rabii said.
Vendors using their balance sheets to help customers buy their products is not a new strategy, said Bernie Margulies, who works on GPU financing at American Compute. The practice is spreading more broadly. AMD has previously backstopped chips for customers. Broadcom recently partnered with Apollo and Blackstone on an AI-infrastructure financing platform. Neither rival can match Nvidia's scale, said Gil Luria, an analyst at D.A. Davidson. He called the chipmaker's financial might a different "order of magnitude."
Alex Yeh, CEO of the neocloud GMI Cloud, which has a backstop agreement with Nvidia, said the deals help the chip giant build an "alliance" with neoclouds and AI startups as its biggest cloud customers develop their own chips. He said that without Nvidia stepping in, GMI would not have been able to take on the AI startup Fireworks as a customer. That deal is worth nine figures.
For Rabii, financing is a complication for one of Majestic's target markets: neoclouds. If a customer wanted to buy billions of dollars of Majestic hardware, his startup could not backstop the financing the way Nvidia can. Instead, he said he is betting Majestic's power-efficient chips will convince customers to choose its systems.
Nvidia's growing financial ties have fueled concerns about circular financing. Margulies said he is not particularly concerned, though the strategy "does cause a lot of investors to be worried." If Nvidia loses market share and has to pay out on its backstops, "it'll be brutal," he said.
Michael Reid, CEO of Australian neocloud Megaport, which does not have a backstop agreement with Nvidia, said overall demand for GPUs provides another safeguard. If one customer falters, the neocloud could rent the capacity to another.
Nvidia CEO Jensen Huang said on X that the company's latest Wall Street partnerships are designed to address concerns about circular financing. Analysts said that tapping outside capital means Nvidia does not have to shoulder as much of the financial risk.
"They're sharing the reward, and they're also sharing the risk," Luria said.
Nvidia's cash strategy adds a new dimension to the investment case. The company's NVDA stock page carries an Alpha Score of 74 out of 100, reflecting a moderate valuation against strong fundamentals. The ability to turn a cash hoard into a self-reinforcing moat – and to bring in outside capital to spread risk – could sustain its lead even as rivals try to close the technology gap.
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