Nvidia Responds to Criticism Over Circular Financing in AI Sector

Nvidia has been grappling with increasing criticism over circular financing, where the company invests in other artificial intelligence (AI) players, these companies purchase Nvidia hardware, and the funds circulate back. This cycle questions whether demand for AI infrastructure truly reflects end-user interest or is merely a financial scheme artificially inflating an already robust ecosystem. Nvidia CEO Jensen Huang has dismissed such criticisms, stating that there are no substantial evidences of the company incentivizing its own demand through these investments. However, the revelation that three direct customers accounted for 44% of Nvidia's first-half fiscal 2027 revenues (16%, 15%, and 13%) adds weight to this discussion in terms of financial sustainability. The International Monetary Fund (IMF) and BIS (Bank for International Settlements) have observed a global increase in the use of debt and private credit across the AI value chain, without singling out any one company. Confirmed deals show Nvidia's significant presence in this financial scheme, with investments in companies like CoreWeave, OpenAI, and various joint initiatives with major financial investors. While Huang’s response dismisses such practices by the company, the question of circular financing is not easily resolved and could have significant implications for hyperscaler capital expenditure plans, potentially leading to renewed scrutiny.