Nvidia (NASDAQ:NVDA) just turned in another strong quarter. Revenue reached 57 billion dollars, up 62% from a year earlier, and the stock rallied as investors leaned back into the AI trade.
What those numbers don't show is how much that growth now depends on a small set of AI customers that are piling on debt and vendor financing to afford Nvidia's chips.
For shareholders, that raises a different question than earlier in the AI boom: not whether demand exists, but whether highly leveraged customers like CoreWeave (NASDAQ:CRWV), OpenAI and xAI can keep refinancing the obligations that Nvidia is counting on.
The stock jumped 2.85% at close to $186, then surged another 5.08% in after-hours
The Problem: Nvidia Is Becoming a Bank (And It Knows It)
Think about a car purchase. Most buyers do not pay the full amount in cash. They finance it and spread the cost across several years.
Nvidia is now in a similar position with GPUs. The difference is that we are no longer talking about tens of thousands of dollars, but about multibillion dollar data center builds.
Many of Nvidia’s biggest customers cannot pay for those chips upfront (a single top‑end GPU can cost U$ 10,000 per unit, and a full rack or data center build can cost hundreds of millions or even billions). So, to keep orders flowing, Nvidia is helping them finance the hardware instead of demanding cash on delivery. The company has put about 110 billion dollars into direct investments and another 15 plus billion into GPU backed SPV debt.
That combined exposure is roughly 67 percent of Nvidia’s annual revenue.
There is a clear historical parallel. Around the dot com bubble, Lucent Technologies leaned heavily on vendor financing. At its peak, about 24 percent of Lucent’s revenue was tied to loans and guarantees extended to customers. When those customers could not pay, Lucent took large write downs and the stock collapsed from 80 dollars to 2 dollars.
Nvidia’s financing exposure, as a share of revenue, is now about 2.8 times larger than what helped sink Lucent.
How The SPV Structure Works
Nvidia does not usually lend directly to CoreWeave, xAI, OpenAI, or similar customers. Instead, it works through Special Purpose Vehicles (SPVs).
The structure looks roughly like this:
- An AI infrastructure company needs around 12.5 billion dollars of GPUs.
- A separate SPV is created. The SPV raises equity and takes on a large amount of debt.
- The SPV uses that capital to buy Nvidia hardware and then leases the GPUs to the AI company over about five years. Under ASC 842, these leases show up on the SPV balance sheet and in Nvidia’s disclosures.
- Nvidia recognizes most or all of the lease contract value as revenue when the transaction closes, not over the full term of the lease. The company may not receive the cash for several years, but the revenue is booked upfront.
- The AI company records lease payments as operating expense. The SPV debt does not sit directly on the AI customer’s balance sheet.
The benefit for the startup is cleaner reported leverage. The benefit for Nvidia is larger reported revenue today. The tradeoff is that more credit risk and duration risk now sits with Nvidia and the SPVs that finance its hardware.
There is even another layer. Nvidia’s cost of capital ranges from roughly 9 to 18 percent depending on the instrument. To make these leases attractive, the effective rate charged to customers is often close to zero or meaningfully subsidized. That spread, on a financing book of about 110 billion dollars, can produce an 8 to 18 percent annual margin drag that does not look like a traditional cost of goods line item.
The Maturity Wall Is Close
This is not a distant risk at all. Several large exposures are approaching key refinancing and funding milestones over the next few quarters.
Event 1: CoreWeave
CoreWeave is the largest single beneficiary of Nvidia linked financing. It has already drawn roughly 8 billion dollars of its 12.9 billion dollars in committed facilities.
The company faces more than 1.5 billion dollars of debt payments by October 2025.
CoreWeave’s Q3 2025 S 1 filing shows that interest expense reached about 311 million dollars in the quarter, roughly triple the prior year. The credit agreements include a clause that any new debt raised must first reduce existing tranches rather than fund growth. That makes it harder to both refinance and continue to scale capacity.
Covenants also require that contracted future revenues cover debt repayments. If customers delay deployments or cancel contracts, CoreWeave can quickly fall out of compliance with those covenants.
If CoreWeave cannot secure an extension or new facilities by early 2026, the company will be pushed into restructuring talks, which is a big issue for the next several quarters.
If CoreWeave fails, Nvidia’s 7 percent equity stake is effectively written down to zero. On top of that, Nvidia could face pressure to support the value of GPU collateral across related SPVs, potentially by buying back hundreds of thousands of GPUs at weaker prices.
Event 2: OpenAI
OpenAI is burning cash at an estimated 57 percent of revenue. For every dollar of revenue, the company is spending around 1.57 dollars. Management expects 2025 losses in the range of 8 to 9 billion dollars on about 13 billion dollars of revenue.
According to recent disclosures, OpenAI does not expect to turn cash flow positive until 2029 or 2030. That path assumes fundraising conditions remain supportive. The company projects cumulative cash burn of roughly 115 billion dollars through 2029, which implies raising at least 120 billion dollars from investors to bridge the gap.
Nvidia has agreed to invest up to 100 billion dollars in OpenAI in ten pieces of 10 billion dollars each. OpenAI receives each new piece only after it hits certain deployment milestones, and the price of each piece depends on what the company is worth at that time.
If OpenAI’s next funding round comes in flat or lower than the March 2025 valuation, the economic value of later tranches falls. Down rounds dilute earlier investors and signal that the market is questioning the current growth and profitability assumptions. In that scenario, Nvidia has less incentive to deploy the full 100 billion dollar commitment on the original terms, and may face write downs on previously funded tranches.
Event 3: xAI
xAI is raising about 15 billion dollars at a valuation near 230 billion dollars, up from roughly 113 billion earlier in 2025. That is a doubling of valuation in under a year without a step up in revenue.
The company is spending heavily on the Memphis Project Colossus data center while still in an early stage of monetization.
If AI funding cools and valuations reset by 30 to 40 percent, the tranches Nvidia has tied to those valuations take an immediate hit. A 20 billion dollar commitment sized off a 230 billion valuation effectively shrinks if the next round prices the company at 160 billion. That can translate into several billion dollars of mark to market losses for Nvidia.
What Happens If Customers Cannot Pay
The risk is a real chain reaction across the SPVs and the customers tied to them.
A simplified path looks like this:
- CoreWeave fails to refinance and defaults.
- Lenders seize GPUs that sit as collateral in SPVs.
- Those GPUs are sold into secondary markets at discounts of 30 to 50 percent.
- SPV collateral values fall and other AI infrastructure SPVs breach covenants.
- Those SPVs default in sequence.
- Nvidia reverses previously recognized revenue on undelivered or non performing contracts and records write downs on investments.
When Lucent’s vendor financing book deteriorated in 2001, the company took around 3.5 billion dollars of loan loss provisions till 2002. The stock crashed from $80 to $2 in less than 18 months. The company merged with Alcatel in 2006, five years later, and never truly recovered.
Nvidia’s vendor financing exposure is about seven times larger in absolute dollars. If even a modest share of the 110 billion dollar portfolio turns bad, Nvidia could easily face 10 to 15 billion dollars of lost revenue and write downs. That would likely compress the price to earnings multiple from the low 50s to the mid 30s or low 40s, which implies downside of roughly 25 to 35 percent from current levels.
What To Listen For From Management
Individual investors may not review detailed credit agreements, but they can still identify potential stress by paying close attention to the language Nvidia uses on earnings calls.
Current language (2025 calls): "We have excellent visibility into $500B+ of Blackwell-Rubin revenue through 2026."
Warning language (what to listen for in Q1 2026 calls): "Many customers are exploring financing options." Or "Our lease portfolio performed in line with expectations." Or vague language about "contract performance" without specifics on deployment velocity.
Any shift toward finance/lease language signals management is managing expectations downward due to hidden customer stress signals. Once management uses that language, the market will immediately price in covenant violations and downgrades.
Once that language starts to appear, analysts and rating agencies will begin to model covenant risks, and the equity market will move ahead of the actual write downs.
The Margin Trap Even Without Defaults
Besides the default risk and the timing of the maturity wall, there is a second problem that’s even more dangerous: even if customers don’t default, Nvidia is structurally losing money on a large slice of these deals.
A simplified example:
- Nvidia finances a $1 billion GPU deployment at 0–2% (to make deals attractive)
- Nvidia’s own cost of capital is roughly 9–18%, depending on the instrument
- That's a 7–16% annual margin loss on every financed deal
- On a $110 billion financing book, that implies $7.7–17.6 billion of annual margin drag, while revenue is recognized as if it were an all-cash sale
This doesn’t show up cleanly in gross margin. The money loss is buried in "investments," equity stakes, and SPVs, which Nvidia looks like it is selling extremely high-margin hardware; underneath, it is giving much of that margin back through subsidized financing.
This gets worse if interest rates stay elevated. Every 1 percentage point increase in effective financing costs widens the annual margin gap by roughly $1.1 billion.
Nvidia isn't financing these deals because the alternative is worse. Without cheap vendor financing, CoreWeave, xAI, and OpenAI would:
- Buy fewer GPUs, or delay deployments
- Shift part of their spend to cheaper AMD hardware or custom ASICs
- Lean more on used or secondary-market equipment
That would mean tens of billions of dollars in lost near-term revenue for Nvidia. So instead, Nvidia chooses to:
- Finance the purchases on very generous terms
- Book massive upfront hardware revenue that pleases Wall Street
And hope to earn back the lost economics over time via:
- Multi-year lock-in to Nvidia hardware
- Equity appreciation in customers like CoreWeave, OpenAI, and xAI
- High-margin software, networking, and platform fees layered on top
Nvidia is not running a clean, high-margin equipment business here. It is pulling forward revenue, absorbing hidden financing losses, and betting that future equity upside and software lock-in will bail out today's concessions. If those bets fail, the margin trap becomes visible fast, and the stock will have to reprice to a much lower, more "normal" hardware multiple.
How to Trade This: Three Specific Watch Points
Watch #1: CoreWeave’s Debt Refinancing Announcement (Due: December 2025)
CoreWeave is scheduled to announce Q3 2025 earnings results in mid-November 2025. Any commentary hinting at refinancing challenges, delayed deployments, or “covenant discussions” is a red flag.
Watch #2: OpenAI Funding Round Valuation (Due: Q1 2026)
OpenAI’s next Series E funding round will telegraph whether the market believes in the company’s path to profitability. If OpenAI ends up taking capital at a flat or down-round valuation from March 2025 levels, it signals the market thinks AI startup burn rates are unsustainable.
Watch #3: Major AI Startup Layoffs or Pivot Announcements
When Anthropic, xAI, or OpenAI announce major cost-cutting or shift away from “at all costs” scaling, that’s a signal that AI infrastructure demand is cooling and customers are hitting monetization concerns.
Layoffs = cash burn concerns = covenant violations incoming.
If You Own NVDA
- Avoid adding aggressively to positions until there is more clarity on CoreWeave’s refinancing path.
- Consider stop losses or structured hedges that limit downside if a major AI customer or SPV shows signs of distress.
- Treat concentration risk carefully. A single vendor financing unwind could erase several quarters of earnings gains.
If You Are Hedging Or Bearish
- One approach is to use 6 to 12 month put options slightly out of the money.
- For example, puts with strikes around 10 percent below spot can act as insurance against a sharp repricing if CoreWeave or another large customer trips covenants.
- A modest premium outlay, framed as a percentage of the underlying position, can create asymmetry if the stock gaps lower on financing news.
Final Thoughts
Nvidia has done extremely well on product and demand. The Blackwell ramp is real, and AI workloads are still growing quickly.
At the same time, the company has leaned heavily on vendor financing and structured commitments to maintain that growth. The exposure is large relative to revenue and heavily concentrated in a small group of customers with aggressive burn profiles and significant leverage.
Lucent’s experience two decades ago shows how quickly vendor financing can flip from a growth tool to a balance sheet problem.
Nvidia’s 110 billion dollar vendor financing and investment portfolio is roughly 2.8 times larger relative to revenue than Lucent’s was at its peak.
Watch CoreWeave. Watch OpenAI. Watch xAI. Those three companies are sitting on Nvidia’s balance sheet time bombs.
The moment one defaults, the others follow. And NVDA follows after that.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Always consult with a qualified financial advisor before making investment decisions. Past performance of margin debt levels and market crashes does not guarantee future results.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
