Nvidia Pauses Revenue Sharing Initiative for AI Cloud Companies

Nvidia has paused some deals associated with a new financing initiative that provided credit support to AI cloud companies in exchange for a share of their revenue. The move, reported by the Wall Street Journal, occurred last week and comes less than two months after the program was announced. The initiative was designed to help small AI cloud firms secure capital for Nvidia chips by guaranteeing a buyer for compute capacity if the firms could not sell it themselves. Under the terms, Nvidia would earn revenue from the hardware sales and a 50 percent share of cloud revenues exceeding a certain threshold.

An Nvidia spokesperson stated that the business model remains in place and continues to evolve due to high demand. During a recent earnings call, the company noted that the model could drive billions in revenue over the medium to long term. However, the program has faced scrutiny from investors who fear that such circular deals could artificially inflate demand. Additionally, some Nvidia employees expressed concerns that the initiative might attract antitrust scrutiny due to the level of control the company sought over how customers conducted their business. Reports indicate Nvidia previously told some providers they could only rent chips to approved customers and preferred distributing capacity among multiple small firms rather than one large client.