Nvidia's $125 Billion Backstop Loses Value After Huang Exit

Nvidia lost roughly $450 billion in market value in the days after Jensen Huang admitted an extramarital affair, and his resignation on Thursday puts the AI industry's most indebted borrowers at the greatest risk, according to investor Joe Kaiser.

Nvidia said Huang resigned as president, CEO and board member, effective immediately, following his admission of the affair with a woman U.S. intelligence officials believe to be a Chinese spy and a subsequent board investigation. CFO Colette Kress is now interim CEO, and the board named Harvey Jones its first chair.

The companies most exposed are the so-called neoclouds — operators such as CoreWeave and Nebius that buy Nvidia chips by the hundreds of thousands, fill data centers with them, and rent the computing power to AI labs, competing with Amazon, Google and Microsoft.

Why does the backstop matter more than the chips?

Kaiser, who started Switchyard Partners this year after serving as CEO of Mercato Partners, which managed about $1.5 billion, argues the risk sits in Nvidia's financing role, not its silicon. Nvidia designs the chips most AI models train on; Taiwan's TSMC manufactures them.

Nvidia also invests in the neoclouds directly: it held about $329 million in Nebius shares at the end of June. In July, Nvidia began offering to rent back unused GPU capacity from neocloud partners at a fixed rate — a floor designed to make banks more willing to lend. It later joined a $500 billion financing platform with six institutional partners, of which Nvidia may backstop up to $125 billion.

"The chip isn't what puts them at risk, but it's the financial backstop that allows CoreWeave or Nebius to go get those hundreds of millions of dollars of debt from Blackstone and Brookfield," Kaiser told Fortune. "Why is Blackstone willing to back a CoreWeave project? It's because they know that there's an Nvidia backstop, a written backstop, behind it, and so it lowers the risk, and then obviously lowers the interest rate."

CoreWeave carried $35 billion in debt at the end of June, and lenders had grown wary of businesses wholly dependent on AI demand well before Huang left.

"If the capital providers now say that Nvidia guarantee is not worth what it was worth a week ago, that puts those neocloud businesses at risk," Kaiser said. "At the end of the day, this is a heavy-asset, infrastructure-based industry."

Who wins and who loses?

OpenAI and SoftBank's SB Energy may be the biggest beneficiaries of Nvidia's backstops, with CoreWeave and Nebius close behind. Nvidia has been in talks over a reported $250 billion backstop to help OpenAI lease an Ohio data center campus that SB Energy is developing.

Neocloud stocks fell Thursday after the resignation:

• CoreWeave dropped about 9%, giving back part of a 25% rally the day before
• Nebius fell 16%, though it also issued weak full-year guidance the same day

Kaiser does not expect Nvidia to lose its grip on AI training for at least two or three years, because customers built on its CUDA software will find it "really hard" to switch. The fight is over inference — running models once they are trained — which now consumes more AI compute than training. There, buyers weigh Nvidia's general-purpose chips against cheaper specialized ones: Qualcomm for robotics, Cerebras, Etched, Google's TPUs and Amazon's Trainium.

"If Nvidia no longer has Jensen as its rainmaker, did that just tip the scale towards using specialized chips?" Kaiser said. "The bigger play is actually for the specialty chip makers." He added that AMD and Broadcom will inevitably gain an opening. Google and Amazon could win twice — by pitching their own chips to labs like OpenAI and Anthropic, and by lending their balance sheets. "The Googles and others can step into that Nvidia backstop arrangement," he said.

TSMC should come through fine, Kaiser said. He estimated about two-thirds of its capacity goes to Nvidia, but said it could shift that output to other customers "in pretty short order."

Is Intel the roadmap for Nvidia?

Kaiser said Huang ran Nvidia on a "hub-and-spoke" model. "The stories are true about Jensen having 60-plus direct reports," he said, which leaves "this leadership vacuum and vision vacuum."

He pointed to Intel after Andy Grove stepped down as CEO in 1998. "Andy Grove and Jensen both have just this iron-fist approach to management, very disciplined approach," he said. Intel kept growing revenue after Grove left but lost margin and "didn't adapt as well" as chip demand shifted toward new uses. "Intel is the roadmap here to what might be ahead for Nvidia."

Kaiser also tied Huang's exit to last week's midterms, where data centers became a campaign issue. Calling Huang the industry's "true spokesperson" for data centers, he said the case for giant single-site facilities weakens further. "This is just more push for distributed edge compute," he said, "away from these mega monolithic data centers."