Nvidia's Guarantee for OpenAI's Data Center Project
Nvidia (164news.com's guide to nvidia) is not backing OpenAI’s rent; instead, it is providing a residual value guarantee for the data center buildings in Ohio. This guarantee was secured on Monday, with Nvidia capping its exposure at $105 billion, down from the initial reported figure of $250 billion in July.
The Mechanics of the Guarantee
- What's Covered: The guarantee is based on the value of the completed data centers, not the rent OpenAI owes.
- Trigger Conditions: Payment is only triggered if OpenAI defaults on a lease or becomes insolvent. Several steps must occur before this reaches Nvidia:
- SB Energy attempts to relet the site at the same price.
- If unsuccessful, it tries to sell.
- Only the remaining shortfall is Nvidia's responsibility, with a cumulative obligation cap of $105 billion.
- Remedies: Nvidia has the option to assume the lease, force a relet, initiate a sale, allow termination, or defer for up to a year while covering project costs.
- Expiration: The guarantee expires if OpenAI achieves a satisfactory credit rating, ends a lease on its own terms, or 20 years after each lease begins.
- Reimbursement: OpenAI has agreed to reimburse and indemnify Nvidia for any amounts paid out, emphasizing that this is a bridge, not a subsidy.
Evolving Figures
Initially reported in July as a $250 billion guarantee across all 10 gigawatts, Nvidia halved its promise by late July. The current figure revealed in the filing on Monday is lower again, with Nvidia confirming a $1.5 billion investment in SB Energy for the initial phase of the project.
Future Plans
Nvidia plans to sell hundreds of billions of dollars' worth of chips into this initial phase of the data center project. SB Energy is preparing for an IPO as soon as next month.