Nvidia (NVDA -4.22%) was part of a broad sell-off in the tech sector on Friday, with shares falling as much as 5.3%. As of 2:11 p.m. ET, the stock was still down 5.2%.
While the tech downdraft was certainly a contributor, the catalyst that sent the chipmaker lower was the rising cost of artificial intelligence (AI) and the question of who will pay for it all.
Image source: Nvidia.
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Reports emerged today that Nvidia may be considering another financing deal with a customer. The company is reportedly in talks to provide billions of dollars in credit guarantees for an Nscale data center that will ultimately be used by Anthropic, according to Bloomberg, which cited “a person familiar with the matter.”
This marks the latest in a growing string of financing and credit commitments Nvidia has made. For example, reports from earlier this week suggest the company has data center-related commitments and guarantees of $165 billion, according to a report that first appeared in The Information.
That’s not all. Nvidia also holds more than $63 billion in equity stakes in publicly traded companies, according to a recent regulatory filing. Many of those stakes are in the chipmaker’s customers, either directly or indirectly. When you include start-ups, that figure climbs to $99 billion.
NVDA Nvidia
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This has fueled fears among some investors of the repercussions if AI adoption slows or someone builds a better mousetrap than Nvidia’s industry-leading graphics processing units (GPUs). If that were to happen, it could be the catalyst that starts the dominoes falling, and the AI trade could all unravel — or so the popular narrative goes.
Yet a look at Nvidia’s recent financials should help put those fears to rest. For the company’s fiscal 2027 second quarter (ended July 26), the chipmaker generated revenue of $96 billion, up 106% year over year — and expects that figure to rise to $108 billion when it reports its Q3 results in mid-November.
Moreover, Nvidia carries more than $99 billion in cash and marketable securities on its balance sheet, which, in my opinion, provides sufficient liquidity to cover its various financing and credit commitments. We’ll have more details when Nvidia releases its next earnings report after the market close on Nov. 17.
At less than 26 times earnings, Nvidia stock hasn’t been this cheap since 2019. Given its industry-leading position and strong financial position, I’d respectfully suggest that Nvidia stock is a buy.