The price of Nvidia’s 5-year credit default swaps peaked last month and is currently trading around that level.
- Nvidia’s chip-and-investment deals with AI companies have fueled concerns that such arrangements may be artificially boosting chip demand and valuations across the sector.
- Nvidia is working with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to mobilize more than $500 billion in financing for potential buyers of its chips.
- Stocktwits sentiment for Nvidia was ‘neutral’ on Thursday.
Hedge fund manager Michael Burry has yet again raised concerns about Nvidia, calling the AI chipmaker’s latest move to partner with Wall Street banks to finance chip purchases a potential “sign of desperation.”
One of the most prominent investors to have taken a short position against the chipmaker at the center of the AI boom, Burry said the move is the latest in a series of circular financing deals involving Nvidia, suggesting such arrangements increase risks for the company and the broader market.
“The more one understands, the more one sees that it is a sign of desperation,” Burry wrote in the chat section on his Substack page. “The idea is to create a channel where Nvidia can prime the capital pump to get more sales and maintain NVDA’s 20 percentage point scarcity-induced gross margin increase since the AI FOMO started.”
Nvidia’s Circular Deals In Focus
Earlier this week, Nvidia announced that it had partnered with financial giants Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to establish AI infrastructure financing platforms to mobilize more than $500 billion. That raised the question if so-called “circular financing” would spiral and Nvidia stock shed 3% on Monday.
The next day, CEO Jensen Huang clarified the structure, writing in an X blog that the chipmaker may provide “a residual-value support mechanism for up to 25% of an opportunity, assessed carefully on a project-by-project basis.” He said “that support is limited, residual-value based and designed to complement — not replace — independent underwriting.”
Nvidia has struck sizable chip-and-investment agreements with several AI companies, fueling concerns that these interconnected deals may be artificially boosting demand for its processors and valuations across the sector.
Nvidia CDS Trends Show Market Anxiety
“Nvidia hoped this PR event would help with perceptions after its credit default swaps doubled in price,” Burry said in his comment.
Nvidia’s 5-year credit default swap (CDS) spread trades at approximately 79.8 basis points (0.798%), hovering near a record peak of 83.7 basis points set in late July 2026, according to Global Markets Investor.
This cost to insure Nvidia debt against default has more than doubled since late May due to market anxiety partly over the company’s circular financing deals.
Hyperscalers including Alphabet, Amazon, Meta and Microsoft are taking on massive debt to fund the AI buildout, pushing up the cost of insuring their debt against default via credit default swaps (CDS) and raising concerns among Wall Street bond investors.
“Nvidia is raising the funding, finding the customers; they’re the vendor, they’re the customer in some cases with CoreWeave, they’re a large customer with Lambda,” tech commentator Ed Zitron said in an interview with CNBC.
“They basically pay people to rent back the GPUs that they sell them; they help raise the debt; they find the sites. It’s vendor financing, but they’ve been smarter than the Ciscos and the Lucents in the past by not actually becoming a bank.”
Nvidia stock has recovered since Monday’s drop and is currently flat for the week. On Stocktwits, retail sentiment for NVDA remained ‘neutral’ for a second day on Thursday.
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