Nvidia explores debt guarantee for Nscale’s West Virginia AI data center

The project is designed to host an Anthropic data center, and the initial building alone is covered by a $44.6 billion contract, as detailed in Nscale’s IPO filing. This potential arrangement would involve Nvidia essentially co-signing loans for a customer, highlighting the challenges faced by the AI industry in securing funding for large-scale infrastructure projects.

Nscale is seeking to secure financing for the construction and electricity costs associated with its West Virginia campus. Under a proposed “residual value guarantee,” Nvidia would temporarily assume control of the facility if Nscale were to default on payments, working to find a new buyer and tenant, The Information reported. This represents a shift for Nvidia, which has previously provided financial support through leases and chip purchases, not construction financing.

Nscale is aiming for a public valuation of up to $35 billion, despite concerns about its ability to deliver on ambitious data center projects. Anthropic’s contract covers the first 460-megawatt building, which is slated to utilize Nvidia’s Vera Rubin chips. Discussions are also underway for a potential second deal valued at approximately $45 billion.

Nscale has encountered difficulties in launching its projects. As of August, the company had only around 25,000 advanced AI chips operational, far short of its goal of deploying nearly 500,000. The West Virginia campus has also faced setbacks, including flooding of nearby homes due to construction runoff. The project ultimately secured state certification in September following months of negotiations.

Recently, Microsoft withdrew from a planned Nscale site in England due to delays in securing grid power, which was pushed into the 2030s. Nvidia has previously invested roughly $170 billion in investments and credit support for AI cloud providers and customers, including a $1 billion convertible financing commitment to Nscale in September.

Neocloud companies, which rent out AI computing power, have faced investor pressure, with shares of CoreWeave, Nebius, and IREN declining by more than 30% in October. The proposed guarantee would strengthen Nvidia’s financial relationship with Nscale and ensure a significant customer for its chips. Anthropic, a major purchaser of AI computing power, distributes its infrastructure spending across multiple chip manufacturers. An investor stated that Anthropic’s involvement is likely a key reason for Nvidia’s interest in the project’s success. Anthropic filed for an IPO this week, and Blackstone has cautioned investors that the company may receive a below-investment-grade credit rating, potentially increasing borrowing costs.