Jensen Huang Said Nvidia's $30 Billion OpenAI Investment Might Be the Last. Nvidia Just Guaranteed Up to $105 Billion of OpenAI's Leases.

In March, Nvidia's (NASDAQ:NVDA) CEO, Jensen Huang, said at an investor conference that the company's recent $30 billion investment in OpenAI "might be the last time" it puts money into the artificial intelligence (AI) start-up.

That, however, wasn't a retreat. And Huang himself said so.

"The reason for that is because they're going to go public," he explained, adding that the $100 billion investment the two companies promoted was likely "not in the cards."

And he said practically the same thing about Nvidia's $10 billion stake in Anthropic.

Further, five months later, Nvidia found another way to commit a huge sum to OpenAI's expansion. In a document dated Aug. 17, the chipmaker revealed residual value guarantees backing OpenAI's data center leases in Pike County, Ohio, with Nvidia's payment obligation capped at $105 billion.

I think the two facts only seem like a contradiction until you read the document. What Huang cast doubt on was buying more shares. What Nvidia is offering now is its credit.

Image source: Nvidia Corporation.

What Nvidia signed

The Ohio campus, called PORTS-Pike, is being built by SB Energy -- an energy and data center developer backed by SoftBank Group, OpenAI, and now Nvidia itself, which is investing $1.5 billion in the company.

SB Energy will build, own, and operate the site, and lease it to OpenAI for 20 years. The campus is expected to reach 8 gigawatts of compute load, and Nvidia's guarantees cover the leases for the first 4.25 gigawatts, with an option to back the rest. In return, the site exclusively hosts Nvidia's full-stack AI factory platform, from its graphics processing units (GPUs) to its networking equipment.

Notably, a residual value guarantee is not spent money. Nvidia delivers nothing today, and no shareholder is diluted.

The $105 billion is a cap on what Nvidia might end up owing under this initial commitment, not a bill. And with the site's commissioning dates starting in 2028, the obligations don't even take effect for another couple of years.

So, when would Nvidia pay?

Only in two situations, according to the document: OpenAI becomes insolvent and defaults on a lease, or OpenAI simply stops paying rent.

But even then, Nvidia wouldn't owe the total guaranteed amount. It would owe the difference between the minimum guaranteed value of a lease and what SB Energy recovers by releasing the space or selling it. Nvidia could also step in and take over the lease itself.

OpenAI, for its part, has agreed to reimburse Nvidia every dollar actually disbursed.

The most useful terms are the exits. Each guarantee ends on the 20th anniversary of its lease, when OpenAI exercises a valid early termination, or once OpenAI achieves a satisfactory credit rating. That last one is possibly the most revealing. The entire structure is designed to be temporary, with Nvidia lending its balance sheet until its client can borrow on its own.

The balance sheet took the place of shares

Whatever your view on the risk, this is not a broken promise from March. After all, the $30 billion investment came as part of the $122 billion funding round that OpenAI completed earlier this year, and Huang's point was that an initial public offering would close the window for buying more shares.

The window for credit support is wide open. And it's cheaper, at least on day one. Nvidia gets the next OpenAI campus built, locks it exclusively for Nvidia hardware, and pays nothing unless something goes very wrong.

Sure, the scale of the deal still commands some caution. Nvidia had $50.3 billion in cash and marketable debt securities at the close of its first quarter of fiscal 2027 (the period ended April 26), plus $30.2 billion in marketable equity securities. The $105 billion cap exceeds both combined.

What makes it manageable, however, is the business underneath. Nvidia's revenue in the fiscal first quarter totaled $81.6 billion -- up 85% year over year and 20% from the prior quarter. And operating income was $53.5 billion. Revenue guidance for the fiscal second-quarter report due Wednesday, the first since the document, sits at $91 billion -- nearly double the revenue from the year-ago period.

The stock, about $215 as of this writing, trades at about 33 times earnings. So, clearly, investors don't seem too concerned. Overall, I agree that Nvidia's dealings, when combined with its powerful business momentum and its strong balance sheet, don't seem too risky. After all, a deal like this costs nothing unless OpenAI fails -- and it is built to expire once OpenAI can stand on its own credit.

But investors should still read carefully. The deal ties Nvidia to OpenAI's fortunes a bit more closely. The bill, if it ever comes, would probably arrive precisely when Nvidia's own earnings are already under pressure (likely when an AI expansion is cooling off).

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.