Jensen Huang is gonewhat happens to the US$500 billion financing platform? The "pillar of trust" underpinning NVIDIA Corporation (NVDA.US)'s AI credit platform is collapsing.

Notice that before NVIDIA Corporation (NVDA.US) was thrown into turmoil by the departure of its long-time leader Jensen Huang, a major initiative he had pushed jointly with Wall Street giants was proving far more complicated than envisioned. According to people familiar with the matter, after reaching a US$500 billion partnership with six of the world's largest asset managers but seeing no transactions close for months, NVIDIA Corporation has faced pressure over the past month from some customers and Wall Street partners to increase the scale of its financing "backstop." The company previously said it would provide so-called "residual value support agreements" covering up to 25% of transaction valuelower than the proportion offered by competitor Broadcom Inc. (AVGO.US). Some people said this gap has made dealmaking more difficult. 25% backstop cannot support deals; first closings may wait until January According to one of the people, the earliest NVIDIA Corporation could announce a transaction is now January. And that assumes Jensen Huang's dramatic departure following reports of an extramarital affair does not drag down any transactionsor the entire initiative. This is a stunning reversal from the scene in Augustperhaps the peak of "Jensanity" on Wall Street. At the time, Jensen Huang, wearing his signature leather jacket, was flanked on television by executives from Apollo Global Management Inc (APO.US), BlackRock, Inc. (BLK.US), Blackstone (BX.US), Brookfield Asset Management (BAM.US), Goldman Sachs Group, Inc. (GS.US) and KKR & Co. (KKR.US). Together they promoted a platform that claimed it would jointly finance AI computing transactions totaling US$500 billion. Backstop mechanism, Broadcom Inc. precedent and NVIDIA Corporation's dilemma Over the past year, the chip debt financing market has exploded in size, with giants such as OpenAI, Anthropic PBC and SpaceX seeking access to the expensive processors needed to complete specific AI tasks. Related spending has exceeded hundreds of billions of dollars. Typically, companies set up special purpose vehicles (SPVs) to borrow money to buy and hold chips, which customers then lease and use. The value of these SPVs comes from the cash flows generated by contracts for use of the technology, plus the value of the chips themselves. But lenders worry that cash-burning companies may default and tear up leases, making the residual value support provided by NVIDIA Corporation and Broadcom Inc. crucial to attracting lenders. Such backstops work as follows: once rent payments are interrupted, the relevant assets will be re-leased or sold to repay remaining debt; if a shortfall remains, the party providing the backstop covers the difference. Crucially, this not only brings in more lenders for these transactions but also helps obtain higher credit ratings, thereby reducing borrowing costs. Broadcom Inc. has already begun conducting such transactions through a partnership with Apollo and Blackstone called "AI XPV" reached in June. In May, Broadcom Inc. provided a backstop for US$30 billion of a US$35 billion debt financing in which Anthropic leased tensor processing units (TPUs)a type of chip manufactured by Broadcom Inc. and Alphabet Inc.'s Alphabet Inc. Class C. The backstopped portion received an investment-grade rating and a lower interest rate. A second US$63 billion transaction will also support Anthropic. According to a document, Broadcom Inc. is providing a backstop for 72.5% of it (about US$43 billion), and the first-lien portion of this financing was arranged by Bank of America Corp (BAC.US), Citigroup (C.US) and Morgan Stanley (MS.US). Meanwhile, Blackstone is the sole provider of the committed portion of the second-lien financing. Some of the debt is expected to be sold to a broader group of lenders in the first quarter. If NVIDIA Corporation refuses to raise its 25% residual value guarantee, it could make its chips harder for AI and cloud customers to afford and reduce the appeal of its transactions to lendersespecially when similar transactions with better terms are being marketed to the market during the same period. For NVIDIA Corporation, a higher backstop ratio means greater risk and would weaken its original intent of using third-party capital to build a platform and fuel the next leg of the AI boom. There is also NVIDIA Corporation's own problemwhere the company goes after losing the only CEO it has had for the past three decades. The company said on Thursday that Chief Financial Officer Colette Kress will serve as interim CEO, and Jensen Huang will no longer have any association with the chipmaker. Under his leadership, NVIDIA Corporation was called "the central bank of AI," taking stakes across the ecosystem and providing backstops to boost confidence in an industry still in its early stages. The August financing announcement was a concentrated expression of this approach. After Goldman Sachs Group, Inc., Blackstone and Apollo had spent months preparing debt transactions without result, Jensen Huang publicly praised the US$500 billion initiative that would provide financing to its customersthe very customers who are the pillars of NVIDIA Corporation's future demand. The shot in the arm came at just the right time: just weeks earlier, AI-focused hedge fund Situational Awareness had suffered huge losses, with shockwaves spreading to tech and chip stocks.