Nvidia talks with insurers to reduce risk of financing AI chips

In short: Nvidia is exploring insurance deals that could protect lenders and chip buyers from losses, which may make it easier to finance expensive AI chips.

What's going on

Nvidia has held talks with insurance companies about covering some of the risks involved when firms borrow money or sign leases to get Nvidia AI chips. These talks are early and may not lead to a deal, according to the Financial Times.

One idea is insurance that would pay out if a smaller cloud company cannot repay a loan, and the Nvidia chips used as backup collateral cannot be resold for enough money. Collateral is like a pawned item that a lender can sell if the borrower does not pay back.

Nvidia is trying to widen the pool of customers beyond the biggest tech companies. Its CEO, Jensen Huang, has said chips should be treated like an “investable asset class,” similar to airplanes, which are expensive, long-lasting equipment often financed with complex deals.

The report says Nvidia has shared data on how chip values fall over time, also called depreciation (how a car is worth less each year). Nvidia is also working with broker Howden Re on a structure involving insurers, according to people familiar with the talks.

This fits a broader push to bring more Wall Street money into AI infrastructure. The FT notes Nvidia recently offered to backstop parts of financing meant to unlock up to $500bn, and it guaranteed $105bn of leases connected to a data center build for OpenAI.

What to watch

If insurers and investors get comfortable pricing the risk of chip-backed loans, more smaller AI and cloud firms could afford the chips they need. A key question is whether chip resale values hold up if supply catches up with demand, since that affects how safe these financing deals are.

Source: Financial Times