Nvidia has suspended some deals that were part of its new financial initiative. The program aimed to provide credit support to cloud companies operating in the artificial intelligence sector in exchange for a share of their revenues. This was reported by the Wall Street Journal, citing sources familiar with the situation.
“The new business model, which provides access to computing resources for the rapidly evolving artificial intelligence ecosystem, continues to operate and develop due to high demand,” said an Nvidia representative.
This move follows less than a month and a half after Nvidia introduced a program to support the financing needs of small artificial intelligence cloud companies. Nvidia intended to lease computing power from its cloud service customers if they were unable to sell it, thereby providing them with a guaranteed buyer and facilitating the capital raising needed for companies to finance their purchases of Nvidia's artificial intelligence chips.
Under this model, Nvidia would receive revenue first from the sale of equipment and then from the share of cloud revenues generated from the computing power operating on the company's solutions. This week, Nvidia announced during a conference call following its financial report that this model has the potential to generate billions of dollars in revenue in the medium and long term.
However, in recent months, investor attention to this issue has increased. According to the publication, Nvidia is directing funds into the artificial intelligence ecosystem, raising concerns that the company may be involved in so-called “circular” deals that could artificially inflate demand. This month, the company helped its clients secure $500 billion in funding from major financial institutions in the U.S., and also agreed to guarantee up to $105 billion to assist OpenAI in leasing a massive data center.
WSJ reported that some Nvidia employees have expressed concerns to current and potential clients that the initiative could attract the attention of antitrust authorities. They also noted that a sensitive issue is how much Nvidia can dictate how its clients should run their businesses.
According to reports, in the first weeks of the program, Nvidia caused dissatisfaction among some potential partners due to the scale of control it sought to achieve.
Nvidia has informed some cloud service providers that they can lease its chips only to clients approved by the company. The company has also indicated that it prefers to distribute computing power among several smaller companies rather than provide it to one large client.
According to the proposed deals, Nvidia would receive 50% of any revenue generated by cloud service providers through its chips if it exceeded a previously established threshold:
