Nvidia is increasingly financing the AI startups and cloud providers that serve as its primary customers. This strategy involves Nvidia providing capital to companies that then use those funds to purchase its high-demand chips.
While this relationship solidifies Nvidia’s market dominance and supports the AI ecosystem, it effectively fuels revenue growth through the company's own investments. Critics label the practice circular financing, warning it may artificially inflate demand.
Investors face significant risk from a potential negative feedback loop. A downturn in the AI sector could cause startups to fail, leading to simultaneous investment losses and a sharp decline in chip sales for Nvidia.
The company now faces scrutiny as its financial stability becomes more closely tied to the performance of its investment portfolio rather than independent hardware sales.