Nvidia's Credit Default Swaps Flash Red as $750 Billion in Deals Sparks Circular Funding Fears
Published on 07/30/2026 at 04:12 | Redaktion boerse-global.de
The market's unease with Nvidia has shifted from chip demand to credit risk, and the numbers tell a stark story. The stock closed at €166.16, shedding 4.08% in a single session, with the seven-day decline reaching 9.43%. That puts the shares 17.95% below the record high set in May. But the trigger this time isn't a slowdown in artificial intelligence spending — it's a growing suspicion that the chipmaker has become its own best customer's banker.
The $750 Billion Web That Has Investors on Edge
At the heart of the anxiety lies a sprawling network of financing arrangements that, taken together, represent an unprecedented bet on the future of AI infrastructure. Nvidia is reportedly negotiating a guarantee of up to $250 billion for a 10-gigawatt data center OpenAI is building in Ohio, developed by SoftBank's Stargate unit. Total project costs are estimated at over $500 billion. Separately, the Wall Street Journal has reported a $350 billion financing package for chip purchases by OpenAI. Add in last week's announced partnership with SK Group valued at more than $500 billion, and the combined volume of Nvidia's active deals exceeds $750 billion.
The logic is straightforward enough: Nvidia locks in years of reliable chip demand, while OpenAI reduces its dependence on individual cloud providers. But the risk falls squarely on Nvidia's balance sheet if data center utilization falls short of projections. Analysts are already drawing parallels to the dot-com era, when equipment makers like Lucent and Nortel extended credit to customers — financing that later proved unsustainable.
Credit Markets Sound the Alarm
The bond market reacted first and most violently. Nvidia's five-year credit default swaps — essentially insurance against default — hit a record 82 basis points on July 27, 2026, doubling in just two months. For a company with a market capitalization of €4.18 trillion, that kind of jump in perceived credit risk is rare. According to Reuters, protection costs for Nvidia rose to roughly 78 basis points, while Oracle's hit about 200 and Meta's reached 93 — all well above the investment-grade index of 53 basis points.
Should investors sell immediately? Or is it worth buying Nvidia?
Prominent market skeptics have seized on the moment. Michael Burry, who has expanded his short position through put options, argues that a significant portion of current demand is being generated through off-balance-sheet credit structures. He warned that Nvidia's "overreach" is driving circular spending to "biblical proportions," pointing to additional risks in the private credit market where AI-related debt is increasingly held by insurers. Mark Cuban has echoed the concern, comparing the situation to the circular spending that preceded the dot-com crash.
The $5 Billion SSI Bet That Fueled the Fire
The debate crystallized around Nvidia's most recent deal. On July 27, the company invested $5 billion in Safe Superintelligence Inc. (SSI), a startup founded by Ilya Sutskever that employs roughly 50 people and has yet to bring a product to market. Critics argue Nvidia is effectively buying itself a future customer for its high-end Vera Rubin platform.
That interpretation, however, overlooks the broader picture. The real investment wave is coming from established cloud providers, not speculative startups. Microsoft reported a 70% increase in quarterly capital spending to $41 billion, with plans for $175 billion in calendar 2026. The core of Nvidia's revenue remains anchored in massive infrastructure buildouts by Big Tech, not venture-backed experiments.
Institutional Buyers Stay the Course
Despite the headlines, not everyone is running for the exits. Cathie Wood's ARK Invest purchased roughly 79,000 Nvidia shares on Tuesday, worth about $15.5 million, part of a $40 million buying spree in Nvidia, Tesla and SpaceX amid the global AI selloff. BofA analyst Vivek Arya maintained his buy rating with a $350 price target. The analyst consensus sits at roughly $310, implying upside of about 57%, while some individual houses see potential for more than a doubling.
Operationally, Nvidia continues to deliver record numbers. First-quarter revenue rose 85% to $81.6 billion, with the data center segment alone contributing $75.2 billion. The company has guided for roughly $91 billion in second-quarter revenue. For the fiscal second quarter ending in August, the consensus stands at about $91.79 billion.
Nvidia at a turning point? This analysis reveals what investors need to know now.
The August 26 Verdict
The gap between market sentiment and analyst expectations is unusually wide. The average analyst price target of €265.92 implies 60% upside from current levels. UBS has called the recent selloff "overdone," pointing to expected free cash flow of roughly $900 billion through 2028. The circular funding concern, the bank argues, ignores that fundamental cushion.
Technically, the stock is approaching oversold territory with a relative strength index of 37.8, while the distance to the 200-day moving average has shrunk to just -0.08% — essentially flat. That setup typically signals increased volatility rather than calm. The 50-day average sits at €179.66, well above the current price.
All eyes are now on August 26, 2026, when Nvidia reports second-quarter results for fiscal 2027. A confirmation of the $91.79 billion revenue consensus would likely puncture the credit panic as an overblown "wall of worry." A miss, however, would give considerable weight to the warnings from Burry and Cuban — and the credit markets are already pricing in that possibility.
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