TLDR
- Nvidia has paused its revenue-sharing financing program with AI cloud companies, according to the Wall Street Journal.
- The program, launched less than two months ago, offered credit support to small AI cloud firms in exchange for a cut of their revenue.
- Some Nvidia employees raised concerns the initiative could attract antitrust scrutiny.
- Under the deals, Nvidia would have taken 50% of cloud revenue earned beyond a certain threshold.
- Nvidia says the broader business model is still in place and “continues to evolve.”
Nvidia has put the brakes on a financing initiative that would have given the chipmaker a slice of revenue from AI cloud companies, the Wall Street Journal reported Thursday.
The program was designed to help small AI cloud firms access capital to buy Nvidia’s chips. In return, Nvidia would take a share of the cloud revenue those chips helped generate.
Nvidia stepped back from the deals last week, the Journal said. The company could still revamp the program or fold it into something else down the line.
The move comes less than two months after Nvidia announced the initiative. The stock (NVDA) was trading around its recent levels when the news broke late Thursday.
How the Program Worked
Under the model, Nvidia would sell hardware to cloud customers and then rent back unused compute capacity if those customers couldn’t sell it themselves. That gave cloud firms a guaranteed buyer and made it easier for them to borrow money to fund chip purchases.
Nvidia would then earn both from the hardware sale and from a 50% cut of cloud revenues generated by Nvidia-powered capacity beyond a certain threshold.
On its earnings call this week, Nvidia said the model had potential to drive billions in revenue over the medium to long term.
But the program ran into friction early. Nvidia reportedly told cloud providers they could only rent chips to approved customers. It also pushed for capacity to be spread across multiple smaller firms rather than one large client.
Some potential partners pushed back on that level of control.
Antitrust Concerns Raised Internally
Some Nvidia employees flagged concerns to current and potential customers that the initiative could draw antitrust attention. There are sensitivities, the Journal noted, around how much a chip supplier can dictate the business practices of its customers.
Investor scrutiny has also been building as Nvidia increases its financial footprint across the AI ecosystem. Critics have raised the possibility of circular deals that could artificially inflate demand for Nvidia chips.
This month, Nvidia helped arrange $500 billion in financing from major U.S. financial institutions for its customers. It also agreed to guarantee up to $105 billion to help OpenAI lease a large data center.
An Nvidia spokesperson said: “The new business model that opens up compute access to the fast-growing AI ecosystem is still in place and continues to evolve due to high demand.”
The Journal cited people familiar with the matter for its reporting. Nvidia has not confirmed the pause publicly beyond that statement.
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