Nvidia (NVDA) shares declined roughly 3% in early trading Monday, extending a 0.9% drop from the prior session, as investors weighed a series of large-scale artificial intelligence infrastructure financing initiatives that have raised questions about the sustainability of demand for the company's chips.
The stock traded near $198.86, underperforming the broader market as other semiconductor names also slid. Advanced Micro Devices fell about 4%, and Intel dropped roughly 2%, reflecting sector-wide unease over the scale of AI-related capital commitments.
Massive AI financing plans under scrutiny
Investor attention focused on reports that Nvidia is discussing financing arrangements that could underpin more than $750 billion of AI infrastructure investment. According to The Wall Street Journal, Nvidia is in talks to provide roughly $250 billion in financing guarantees to OpenAI to support the lease of a 10-gigawatt data center being developed by SoftBank subsidiary SB Energy in southern Ohio. The project is expected to cost more than $500 billion in total.
Separately, Nvidia is reportedly discussing financing up to $350 billion of OpenAI's future chip purchases for the project. The arrangement would allow OpenAI to begin controlling more of its own computing infrastructure instead of relying on cloud providers such as Microsoft, Amazon, and Oracle, while securing long-term demand for Nvidia's processors.
In addition, Nvidia announced an AI infrastructure initiative with the parent company of South Korean memory chipmaker SK Hynix that it said is worth more than $500 billion. This follows a recent pact with SK Hynix aimed at addressing AI memory bottlenecks.
Financing strategy draws criticism
The growing scale of Nvidia's financing initiatives has renewed debate over whether the company is helping create demand for its own products. Critics argue that Nvidia's investments, financing arrangements, and equity stakes in AI companies may artificially support demand for its chips and inflate valuations across the sector.
Concerns center on whether financing-backed infrastructure projects could create distorted incentives or amplify risks if demand for AI services ultimately falls short of expectations. Some analysts have drawn parallels to recent turbulence in neocloud stocks, where rising costs and competition fears have weighed on valuations.
BofA remains bullish despite headwinds
Despite those concerns, Bank of America Securities reiterated its Buy rating and $350 price target on Nvidia. The firm said Nvidia's support for both open-source AI models and proprietary developers such as OpenAI reflects a strategy aimed at maximizing demand across the broader AI ecosystem.
According to Bank of America, open-source models encourage adoption among enterprises, sovereign customers, and startups, while OpenAI remains one of the largest consumers of AI infrastructure. The combination should accelerate graphics processing unit demand and expand Nvidia's ecosystem, although investors are increasingly questioning how much industry spending is being driven by underlying demand versus financing support.
Bank of America also noted that frontier AI laboratories account for about 20% of Nvidia's data center revenue, with the remaining sales coming from a broader customer base. The firm identified the principal bear case as the potential for financing-assisted demand to compress Nvidia's valuation multiple as investors reassess the sustainability of AI spending.
Nvidia has recently begun to narrow its performance gap with the broader semiconductor sector. The stock is up about 3% in July while the PHLX Semiconductor Index has fallen 17%. However, Monday's decline suggests that investor skepticism over the financing-driven demand model may persist in the near term.
This article is for informational purposes only and does not constitute financial advice.
