Nvidia Moves to Back GPU Cloud Provider Firmus After Investors Balk at Its IPO

Nvidia is in talks to invest hundreds of millions of dollars in Australian AI cloud provider Firmus, which abruptly pulled its initial public offering early this month, according to people familiar with the talks.

The discussion indicates that Nvidia is likely to continue backing a group of unproven firms known as neoclouds that is facing financial pressure after they stacked up on debt to purchase Nvidia graphics processing units for data centers. Nvidia has already put more than $170 billion on the line for such firms and other large customers, including credit guarantees to help them raise the debt, according to The Information’s analysis.

Many of these neoclouds are unproven and need massive revenue growth to be able to pay down debt they’re borrowing to buy primarily Nvidia servers. That’s become a problem as interest rates have ticked up. Last week, shares of the biggest neocloud, CoreWeave, and its smaller public rivals fell around 20%. The concerns even hit bigger AI cloud providers like Oracle.

It isn’t clear whether Nvidia’s continued financial support will allay investors’ concerns about the sector. At an event in Stockholm last week, Nvidia CEO Jensen Huang said CoreWeave, for one, wouldn’t require a further credit backstop from Nvidia. And CoreWeave’s CEO, in a note to staff, privately blamed smaller neoclouds like Firmus that have shorter track records for damaging the sector’s reputation.

Firmus’ revenues are tiny in comparison to CoreWeave’s, so it arguably needs a lot more support.

Firmus is trying to privately raise at least $2 billion in the wake of its failed IPO, in which it was reportedly seeking to raise $5 billion. Nvidia was poised to invest a material amount of capital in that deal, said a person with knowledge of it. The amount Nvidia would invest in the new capital raise could change, and the raise could still fall apart. Bloomberg earlier reported on the Firmus private round but Nvidia’s role hasn’t been reported.

Neoclouds are critical to Nvidia because its biggest customers—namely, Google, Microsoft and Amazon—are making their own server chips to reduce their reliance on Nvidia’s. This summer, Nvidia even changed the way it reports its revenue in a way that further highlights neoclouds, which it began to support in earnest in 2023, when demand for GPUs skyrocketed.

Whether Nvidia continues to support that ecosystem could make or break some neoclouds’ survival or spark a consolidation of the sector, which some executives in the field view as inevitable.

Nvidia has already modified the way it provides credit support to some firms that must raise capital for new facilities.

Nvidia appears eager to prove the skeptics wrong by providing additional equity investments, chip allocations, credit support and customer leads to the neoclouds. A team at Nvidia, which Huang’s son-in-law Nico Caprez co-leads, has even begun helping neoclouds find sites with available power, which are hard to come by because it takes a long time to either source independent power or get connected to the electric grid, executives at Nvidia and neoclouds say.

The seven-year-old Firmus sought to list its shares at a reported $30 billion valuation on the Australian stock exchange before pulling the offering, citing market volatility. Investors reportedly felt the valuation was too high and too speculative, based on Firmus’ revenues and its planned data center capacity. Firmus’ major investors include Blackstone, Coatue Management and Jane Street. Nvidia has participated in Firmus’ last three funding rounds. The company has raised more than $13 billion in total, including around $10 billion in debt.

Firmus was one of the first participants in Nvidia’s new program to provide credit support to neoclouds in exchange for a cut of their cloud revenues. Nvidia agreed in June to backstop Firmus’ purchase of server racks containing at least 170,000 of its Rubin and Blackwell GPUs, to make it easier for the firm to raise debt. The server racks would cost an estimated $15 billion and are set to go into a data center in Batam, Indonesia built by Singaporean data center developer DayOne, which is also trying to go public.

Neocloud executives say that despite the market turn against neoclouds, their counterparts at Nvidia have been positive in meetings and haven’t yet suggested brand-new types of financial arrangements to remedy the market jitters. However, Nvidia has already modified the way it provides credit support to some firms that must raise capital for new facilities. Some bigger neoclouds passed on Nvidia’s initial credit-support offer, which it made in exchange for a share of the neoclouds’ future revenues. Nvidia is now offering shorter-term, credit-support agreements in exchange for a smaller cut of revenues, according to one of those executives with knowledge of the shift.