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Nvidia's credit wrapper pays royalties
Nvidia is not the lender, so this is not quite vendor financing. Somebody else lends the GPU buyer the money, and Nvidia still makes equity investments, writing into them that the money can't be used to buy Nvidia chips.
The structure could turn into a giant cloud business through royalties very quickly. It also bridges the gap while everyone is free cash flow negative, until operating cash flow accelerates enough to fund the buildout internally. It raises Nvidia's revenue per gigawatt and strengthens its position, since nothing is more financeable than an Nvidia GPU. Startups that buy HBM DRAM pay higher prices for it than Nvidia does, and their chips can't be financed at Nvidia's rate.
Picture a memory maker such as Hynix joining in. It puts up some cash up front as surety for the lender, and takes a cut of the ongoing revenue. That trades upside for durability, the same bargain as the long-term supply agreements.
Why did vendor financing draw scrutiny before?
In the late 1990s, telecom equipment makers lent money to their own customers so those customers could buy more equipment. When the telecom bust arrived in 2001, several customers failed and the makers absorbed the losses. Sales that had been supported by loans were revealed to have depended on the loans. That history is why analysts look closely at who stands behind the money whenever a supplier is tied to its buyers' financing.
Why is a GPU easy to finance?
Lenders prefer collateral that is standardized, easy to value, and easy to resell. Aircraft and shipping containers are financed on the same basis, because deep secondary markets let a lender recover value if a borrower defaults. A widely used GPU model has many potential buyers and a visible rental price, which gives lenders a way to estimate its worth. A custom chip with few buyers offers no such reference.
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