‘That Nvidia guarantee is not worth what it was worth a week ago’: What Jensen Huang’s exit means for neoclouds

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Neoclouds have the most to lose

Jensen Huang’s resignation from Nvidia hits the AI industry’s most indebted borrowers hardest, according to one investor who backs AI infrastructure.

Nvidia said Thursday that Huang resigned as president, CEO and board member, effective immediately. His exit follows his admission of an extramarital affair with a woman U.S. intelligence officials believe to be a Chinese spy, and following a board investigation into the affair. CFO Colette Kress is now interim CEO, and the board named Harvey Jones its first chair.

While Nvidia’s leadership switch-up is sending shockwaves across every industry that relies on its chips to those who simply have stock or their 401Ks resting in company, some say the companies that are most at risk are the so-called neoclouds that rely on Nvidia’s chips.

Nvidia designs the chips that most AI models are trained on, and Taiwan’s TSMC manufactures them, and that’s a problem. So says Joe Kaiser, who started Switchyard Partners at the beginning of this year after serving as CEO of Mercato Partners, which managed about $1.5 billion.

Neoclouds such as CoreWeave and Nebius buy those chips by the hundreds of thousands, fill data centers with them and rent the computing power to AI labs and other companies, competing with Amazon, Google and Microsoft.

But Nvidia does more than sell to them. It invests in them: the company held about $329 million in Nebius shares, for example, at the end of June. Nvidia also guarantees their business. In July, Nvidia began offering to rent back unused GPU capacity from neocloud partners at a fixed rate, a floor meant to make banks more willing to lend. The company later joined a $500 billion financing platform with six institutional partners, of which Nvidia may backstop up to $125 billion. That backstop, Kaiser said, posed an issue for what lenders are pricing.

“The chip isn’t what puts them at risk, but it’s the financial backstop that allows CoreWeave or Nebius to go get those hundreds of millions of dollars of debt…

Core…

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