NVIDIA stock is starting to show signs of activity ahead of next week’s financial results. This move is justified and there should be room for more. Nvidia stock closed for the second consecutive session on Monday around $225 per share, the lowest closing price since mid-May. This is a sign that market sentiment is warming towards the leading AI chip maker, which has been met with a lukewarm reception for much of this year. The reason for the change is that Nvidia’s increased financial support for key customers appears to be less risky than initially feared, and new funding initiatives should make it easier to finance AI builds. Additionally, new details about the rapid growth in revenue for large users of Nvidia chips, OpenAI and Anthropic, bode well for their ability to continue spending on computing in the future. Nvidia’s recent rise has taken the company up more than 20% since the beginning of the year, outpacing the tech-heavy Nasdaq Composite Index (up about 15%) and the S&P 500 (up about 13%). “I think (NVIDIA) can continue to rise,” Jim Cramer said at a Monday morning meeting. The company is scheduled to announce its fiscal 2027 second quarter financial results next Wednesday, August 26th. Indeed, Nvidia’s multi-week rally coincides with a broader recovery in AI infrastructure trading following the forced exit of situational awareness hedge funds. Since the recent market low on July 29, NVIDIA stock is up about 18%. By comparison, the iShares Semiconductor ETF is up 2% and the VanEck Semiconductor ETF is up almost 18%. Nevertheless, it’s actually encouraging to see Nvidia maintain a pace that matches these two chip baskets during this period. That’s because the stock has underperformed for much of this year as money flooded into bets on memory and central processing units (CPUs) and the sustainability of Nvidia’s growth faced new questions. NVDA SOXX,SMH YTD Nvidia’s year-to-date stock performance against Mountain SOXX ETF and SMH ETF. It’s easy to suggest that the surge in big leveraged players has pushed stock prices to the bottom, but that alone isn’t enough to keep the move going. But the three funding-related updates we’ve received since then suggest it could very well be. The latest information arrived on Monday, when Nvidia officially announced its support for a massive data center project in Ohio, with ChatGPT creator OpenAI set to become a tenant on a 20-year lease. An energy subsidiary of Japanese conglomerate SoftBank, known as SB Energy, will lead the development and own the facility. According to the press release, Nvidia will be the exclusive computing provider. Details revealed Monday suggest that NVIDIA is highly sensitive to investor concerns about its financial backing for building AI. Consider: On Sunday night, July 26, the Wall Street Journal reported on the 10 gigawatt Ohio campus and said NVIDIA was in talks to “provide about $250 billion in backstop” to the project. This report, later confirmed by CNBC, was at least partially responsible for the approximately 5% drop in NVIDIA stock the next day. This further heightened some investors’ concerns about “cyclical trading” within AI. What we learned Monday is that the backstop will actually only cost $105 billion because it focuses on building the first 4.25 gigawatts, rather than the entire project. And to reduce financing costs, NVIDIA plans to invest $1.5 billion in SB Energy, which could go public as early as next month, the Journal reported on Monday. In addition to reducing capital risk if the project goes awry, NVIDIA is only putting its completed data centers at risk, not those under construction, according to the magazine. Furthermore, the backing is for the assets within the data center and the facility itself, meaning that Nvidia is not exposed to any lease payment obligations by OpenAI. According to the magazine, Nvidia’s support will only be triggered after a series of steps. If OpenAI withdraws from the lease, SB Energy will seek a replacement tenant at the same price. If SB Energy cannot find a suitable successor, it will likely consider selling the campus. At that point, NVIDIA will have to pay the difference in value of up to $105 billion. Importantly, the $105 billion backstop is thus highly dependent on the residual value of the chips. Nvidia has unique insight into the risks it’s taking here, as it has developed and executed product roadmaps that impact the value of older chips. In theory, CEO Jensen Huang and CFO Colette Kress only agreed to the $105 billion request because they believe the risk is minimal. There’s a lot to break down, so let’s backtrack. Rather than providing $250 billion in support as was reportedly originally being considered, Nvidia will provide $105 billion in support and a $1.5 billion investment for site owners. Furthermore, that $105 billion is backed by the value of 4.25 gigawatts of data center assets, estimated at $50 billion to $60 billion per gigawatt, for an initial value of over $200 billion. Additionally, this support will only be triggered if SB Energy is unable to find a new tenant at the same price and sell the site at a fair price. Importantly, given NVIDIA’s current stake in SB Energy and the fact that the site appears to be planning to host only Nvidia technology, Nvidia’s exposure to this deal is much smaller than feared and doesn’t appear to be a big hit to its potential upside. This follows Nvidia’s $500 billion funding plan announced last week in partnership with some of Wall Street’s most influential companies, including Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR. The initiative, which essentially securitizes computing and provides asset-backed securities to investors, will help companies further reduce the risks of ramping up. While it is true that large sums of money are still at risk, the securitization of computing means that the risk of financing shifts to the institutional investors providing the capital, rather than weighing on the cash flows and balance sheets of the ramp-up companies like hyperscale companies. As a result, we will continue to receive the funding we need to build more data centers to meet the burgeoning demand for AI computing. But instead of companies adding tens of billions of dollars to their capital spending budgets, we are starting to have the financial structures needed to tie the cash flow from these “AI factories” directly to debtors. The idea of securitizing computing is still in its infancy, and while we don’t yet have all the details on how NVIDIA and its Wall Street partners will bring this concept to market, it’s certainly the foundation that infrastructure players need to ease the pressure on them to fund their builds themselves, whether through internally generated cash flow or, increasingly, debt and equity offerings. The third piece of positive funding news that will help Nvidia rise is the strong financial performance of OpenAI and Anthropic, the world’s largest and most important AI labs. Late Friday, Bloomberg News reported that Anthropic’s second-quarter revenue soared 14 times on an annualized basis to more than $11.5 billion, and it posted a positive adjusted operating profit. A day earlier, news outlets reported that OpenAI is expected to reach annual revenue of about $40 billion this year. This is almost double the run rate in 2025. The most obvious risk associated with funding AI is counterparty risk. If the company that has the obligation is able to meet its obligations, there is no need to worry too much. But when the company in question is privately held, meaning its financial information isn’t publicly available, it’s unprofitable, and it’s thought to be wasting money faster than probably any startup in history, that’s a big story. We’ll specifically talk about OpenAI here. Anthropic’s financials are generally considered to be healthier, but the picture is incomplete as it still relies on press coverage for these details. While risks to OpenAI’s financial health remain, last week’s report should help reduce (though certainly not eliminate) concerns about OpenAI’s ability to meet its obligations and, therefore, the risk that Nvidia’s financial support will actually be needed. Granted, revenue alone cannot pay off debt, but rapid revenue growth is a key factor when it comes to raising debt or selling equity, whether in the private markets or talking about a potential initial public offering (IPO) in the future. OpenAI and Anthropic have both filed confidential IPO applications with regulators, but the exact timing of the potential business remains unclear. The bottom line? Nvidia’s stock price certainly benefited from the deleveraging event caused by the loosening of situational awareness. This gave investors a new perspective on the decline in AI infrastructure stocks that began roughly in late June and continued into July. Specifically, the idea that the selloff reflected weakening fundamentals quickly dissipated. But with improved financing capabilities, it’s poised to move higher from here. (Jim Cramer’s Charitable Trust is long NVDA. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in the charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, as well as our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
