Nvidia Shares Drop as Investors Fear Circular Financing

Nvidia shares fell nearly 5% on Monday, erasing approximately $250 billion in market value and losing its position as the world's most valuable company to Apple. The decline follows reports that Nvidia Corp is pursuing more than $750 billion in AI infrastructure deals, including a $500 billion partnership with South Korea's SK Group to construct data centers. The company is also in preliminary talks to provide a $250 billion guarantee for OpenAI's lease commitments at a SoftBank-developed campus in Ohio, alongside $350 billion in chip financing.

Other strategic moves include a $1 billion investment in Naver Corp and a $5 billion partnership with Safe Superintelligence. These arrangements have sparked investor alarm over circular financing, a practice where a supplier provides capital or guarantees to customers who then use those funds to buy the supplier's products, potentially inflating valuations and demand.

CEO Jensen Huang dismissed the circular financing concerns as "ridiculous." Despite his defense, the debt market responded with a record surge in the company's five-year credit default swap spread.