Nvidia is not supporting OpenAI's lease; it is supporting the structures.

      A residual value guarantee refers to a commitment regarding a physical asset, rather than about a tenant. One party constructs an asset, another rents it, and a third party assures that the asset will maintain a certain value. If the tenant vacates, the property owner can either rent it out again or sell it. The guarantor is responsible only for any deficit. This is the foundation of a car lease and is now the basis for the largest data center project ever announced.

      On Monday, Nvidia confirmed this arrangement, having secured land, power, and shell capacity at the PORTS-Pike Technology Campus located in Pike County, southern Ohio. SB Energy will be responsible for constructing, owning, and operating the campus. OpenAI has signed a 20-year lease as the client. The initial phase will encompass 4.25 IT-gigawatts, with Nvidia holding an option on the additional 3.75.

      “Now is the time to scale the AI infrastructure that will support the next industrial revolution,” stated Nvidia’s founder and CEO, Jensen Huang.

      What Nvidia has promised is that, as first reported by The Wall Street Journal in an article by Anissa Gardizy, Nvidia guarantees the value of the completed data centers rather than the rental payments. In exchange, Nvidia will be the exclusive chip supplier for the first half of the site and will acquire an equity stake in SB Energy, with the potential to extend its commitment to cover the entire campus later.

      Details are outlined in a filing made by Nvidia on Monday. Payment obligations arise only if OpenAI defaults on the lease or becomes bankrupt. Certain conditions must be met before Nvidia is impacted: SB Energy must attempt to relet the site at the existing rate, and if unsuccessful, must try selling it. Nvidia is only liable for the outstanding shortfall, with a total obligation capped at $105 billion.

      Nvidia has the discretion to choose the remedy, which could include assuming the lease, enforcing a reletting, initiating a sale, allowing for termination, or deferring payments for up to a year while covering project expenses. The guarantee applies only to completed buildings, not those under construction, and it can expire in three scenarios: if OpenAI achieves a satisfactory credit rating, if OpenAI voluntarily terminates the lease, or 20 years after each lease commences.

      One additional clause indicates that OpenAI will reimburse and indemnify Nvidia for any amounts Nvidia pays out. This stipulation offers limited value, as any claim against an insolvent OpenAI would not be substantial. It highlights that the structure serves as a bridge rather than a subsidy.

      Initially, in late July, the Journal reported that Nvidia was considering a guarantee for all 10 gigawatts, approximately worth $250 billion. Following this news, Nvidia’s shares dropped by 5%. By Friday, the company reduced that guarantee, and the filed amount is now lower still. The sizeable aspect was what everyone focused on, while changes occurred regarding the structure itself.

      The Information disclosed on Saturday that Nvidia was deliberating an investment of up to $3 billion in SB Energy, divided into two payments: one upon signing and the second at the developer’s public offering. Reuters echoed this report on the same day. Nvidia has since confirmed a $1.5 billion investment, representing the first installment. SB Energy is currently engaging bankers to prepare for a listing as soon as next month.

      Regardless of the developments, Nvidia stands to gain from the site. It anticipates selling hundreds of billions of dollars worth of chips for the initial phase, according to sources familiar with the agreement. This brings forth the circularity that critics often mention. Recently, Nvidia established a similar deal with six financial institutions, and Google did likewise for Anthropic in July.

      The campus will transform the Portsmouth Gaseous Diffusion Plant, a Cold War-era uranium enrichment facility. It includes both privately owned land and federal land leased from the Department of Energy. SB Energy and SoftBank aim to generate at least 10 gigawatts of new power, with 9.2 gigawatts coming from natural gas. The gas facility is owned by the US government and financed by Japan under a recent trade agreement.

      Local residents will feel the effects of this power development. SB Energy and AEP Ohio plan to invest at least $4.2 billion in new transmission infrastructure, including 765-kilovolt lines and four substations. OpenAI claims the project will independently cover these costs without passing them on to Ohio ratepayers, noting that their cooling system is closed-loop and air-cooled, with water consumption levels akin to those of a standard office building. These commitments reflect the company's own stated promises.

      Expected job figures have increased in various documents. A Department of Energy fact sheet from March estimated over 10,000 construction jobs over four years and more than 2,000 operational positions. However, OpenAI now projects 35,000 construction jobs over a six-year rollout extending to 2032, plus