Nvidia is in advanced discussions to provide a residual value guarantee for Nscale’s planned artificial intelligence data center in West Virginia, according to reports from The Information and Bloomberg. The proposed arrangement would see the chipmaker step in to cover billions in debt financing if Nscale defaults on construction payments, a significant escalation in Nvidia’s financial involvement with cloud providers.
Under the terms of the potential deal, Nvidia would temporarily take over the facility in the event of a default and assist in finding a new buyer or tenant. This structure differs from Nvidia’s previous financial support for the sector, which has largely focused on leasing agreements and direct chip purchases rather than construction debt.
High Stakes for Nscale and Anthropic
The financial backing is critical for Nscale, which is currently seeking to go public with a valuation of up to $35 billion. The company faces intense scrutiny regarding its ability to deliver on ambitious infrastructure projects. Nscale’s IPO filing reveals that Anthropic has signed a $44.6 billion contract for the first building of the West Virginia campus alone.
Anthropic, one of the largest buyers of AI computing power, is also discussing a second deal worth approximately $45 billion for another building at the site. The facility is expected to utilize Nvidia’s next-generation Vera Rubin chips. Investors believe Nvidia’s interest in keeping the project on track is driven by the need to secure a major customer for its hardware.
However, the project has encountered significant hurdles. Nscale has struggled to scale its operations, operating with roughly 25,000 advanced AI chips in August compared to a target of nearly 500,000. The West Virginia site has also faced local opposition, with construction runoff flooding nearby homes multiple times. The project only received state certification in September after months of negotiations.
Broader Industry Financing Pressures
The discussions highlight the growing difficulty of financing large-scale AI infrastructure as investors grow wary of the capital required. Nvidia has extended approximately $170 billion in investments and credit support to neoclouds and large customers, including a $1 billion convertible financing commitment to Nscale in September. Yet, the market response to these ventures has been volatile.
Shares of neocloud providers such as CoreWeave, Nebius, and IREN have each fallen more than 30% in October, reflecting investor jitteriness. The sector is also grappling with power grid limitations, evidenced by Microsoft’s recent withdrawal from a planned Nscale site in England due to delayed grid power availability.
Anthropic itself is facing financing questions as it prepares for its initial public offering. Blackstone has warned that the company may receive a below-investment-grade credit rating, which would increase borrowing costs and force reliance on stronger partners to back its debt. Nvidia’s potential guarantee would help mitigate these risks for Nscale while ensuring Anthropic’s infrastructure needs are met.
Source: TechCrunch
