By Rajwa Quasim
Chipmaker Nvidia paused some deals in a financing initiative that offered credit support to AI cloud companies in exchange for a share of revenue, The Wall Street Journal reported, citing people familiar with the matter.
The AI Compute Partnership was a credit program designed to solve a financing problem faced by smaller cloud providers. Under the program, the chipmaker agreed to rent back computing capacity from cloud customers if they were unable to sell it themselves. Nvidia would also collect a share of the revenue generated from Nvidia-powered capacity, on top of what it earned from selling the chips in the first place.
According to Reuters, Nvidia had told some customers they could only rent chips to approved customers and signaled a preference for capacity to be spread among multiple smaller AI firms rather than concentrated with one large buyer. But employees expressed concerns about how much control the company could exert over customers’ businesses and their choices, as well as the possibility of drawing antitrust scrutiny. Some cloud providers resisted the demand, arguing that choosing their customers should be a decision they are free to make.
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According to people familiar with the matter, the company had irked some potential partners early on with the degree of control it sought. The chipmaker stepped back from the initiative last week, less than two months after introducing the program. Nvidia could still modify the financing model or even incorporate it into another program.
A Nvidia spokesperson said, “The new business model we introduced in July that opens up compute access to the fast-growing AI ecosystem is still in place and continues to evolve due to high demand.”
According to the company’s statement, the cloud providers that participated in the AI Compute Partnership include Sharon AI and Firmus Technologies.
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On its earnings call this week, Nvidia said the financing program had the potential to generate billions of dollars over the medium to long term. But investor scrutiny has grown in recent months as the company funnels money back into AI companies, fueling concerns about circular deals that could inflate demand for its chips. Those concerns have increased as the company helped arrange $500 billion in financing from major U.S. financial institutions for its customers and separately agreed to guarantee up to $105 billion to help OpenAI lease computing infrastructure.
Despite those concerns, Nvidia reported record quarterly results. It generated revenue of $96.2 billion, sharply higher than a year earlier, and surpassed the forecast revenue of $92.2 billion. Nvidia’s operating expenses surged 55% to $8.41 billion. The company also forecast roughly $108 billion in revenue for the following quarter.