Nvidia Considers Guaranteeing Debt for Nscale’s AI Data Center Project in West Virginia

Nvidia is reportedly in talks to guarantee billions in debt financing for Nscale’s planned Anthropic data center in West Virginia, as reported by The Information on October 31. Bloomberg later confirmed this information. Nscale has signed a $44.6 billion contract for the first building of the project, according to the company’s IPO filing.

This arrangement would assist Nscale in securing financing for the construction and electricity costs associated with its West Virginia campus. Under a residual value guarantee, Nvidia would step in if Nscale defaults on construction payments, temporarily taking over the facility and assisting in finding a new buyer and tenant.

Historically, Nvidia’s support for cloud providers has focused on leases and chip purchases rather than construction financing. The stakes are particularly high for Nscale, which is aiming for a public valuation of up to $35 billion despite concerns about its ability to execute ambitious data center projects.

Anthropic’s contract with Nscale pertains to the first 460-megawatt building at the West Virginia campus, which is expected to utilize Nvidia’s next-generation Vera Rubin chips. The companies are also discussing a second deal worth approximately $45 billion for an additional building.

Nscale has faced challenges in launching its projects, with only about 25,000 advanced AI chips operational as of August, significantly below its goal of nearly 500,000. The West Virginia campus has encountered issues, including runoff from the construction site that has flooded nearby homes multiple times. In September, the project received state certification after lengthy negotiations.

Recently, Microsoft withdrew from a planned Nscale site in England due to delays in grid power availability. Nvidia has been a significant financial supporter of the AI sector, extending approximately $170 billion in investments and credit support to neoclouds and large customers, including $1 billion in convertible financing to Nscale in September.

Neoclouds, which provide AI computing power without a substantial cash-rich core business, have faced pressure from investors. Shares of companies like CoreWeave, Nebius, and IREN dropped more than 30% in October.

The proposed guarantee would strengthen Nvidia’s financial ties to Nscale while securing a major customer for its chips. Anthropic, a significant buyer of AI computing power, has diversified its infrastructure spending across various chipmakers. An investor noted that Anthropic’s involvement likely explains Nvidia’s interest in ensuring Nscale’s project proceeds.

These discussions occur as Anthropic faces scrutiny regarding its financing for rapid expansion. The company filed to go public recently, but Blackstone has cautioned that it may receive a below-investment-grade credit rating after its IPO, which could increase borrowing costs and necessitate reliance on stronger partners for debt support.

Source: TechCrunch