Billionaire investor Mark Cuban warned on Tuesday that Nvidia Corp.'s expanding role as a financier for artificial intelligence infrastructure creates significant credit risks that could destabilize the market. Cuban compared the chipmaker's strategy to the IPO frenzy of the dot-com era, stating that Nvidia is effectively "funding everyone and anyone." He cautioned that a single breakthrough by a rival or a corporate misstep "could crumble" the current AI boom, echoing concerns previously raised by CNBC host Jim Cramer about investor anxiety over Nvidia's balance sheet exposure.

The comments follow reports that Nvidia is exploring a $250 billion financing guarantee for OpenAI's planned data center in Ohio. This development has intensified scrutiny over whether supplier-backed financing represents a sustainable growth model or a self-reinforcing cycle of risk. Cuban noted that these credit risks extend "far beyond Oracle," identifying AI cloud providers, or "NeoClouds," as weak links in the infrastructure buildout.

Dot-Com Parallels

Both Cuban and Cramer drew direct comparisons to the 2000 dot-com bubble. Cramer described Nvidia's new dynamic as the "First National Bank of Nvidia," suggesting that investors are reacting to memories of past excesses where financing-driven growth led to severe corrections. Cuban reinforced this view, calling Nvidia the "IPO" of the current era, implying that the company is subsidizing competitors and customers alike, thereby deepening systemic credit problems.

Shift in Investor Focus

Wall Street's evaluation of Nvidia Corp. appears to be shifting from pure product demand to balance sheet implications. While demand for AI chips remains strong, the focus is now on the financial risks associated with funding customer data center buildouts. Seaport Research analyst Jay Goldberg warned that vendor financing has historically backfired, citing Lucent Technologies' strategy during the telecom boom as a cautionary tale. Goldberg stated, "These kinds of financing usually don't end well."

Key Concerns from Investors

What the Numbers Show

Despite the heightened rhetoric, Nvidia shares gained 0.25% to $197.01 on Tuesday and edged 0.31% higher in after-hours trading. Benzinga Edge rankings indicate NVDA has a Momentum score in the 40th percentile and a Growth score in the 98th percentile. The divergence between strong growth metrics and rising credit anxiety suggests that while operational performance remains robust, valuation risks are increasing due to non-operational financial commitments.

Nvidia Corp’s (NASDAQ: NVDA) credit default swaps posted their largest one-day jump on record, rising roughly 14 basis points to approximately 82 basis points, as investors grew increasingly wary of the company’s expanding role in financing artificial intelligence infrastructure. The surge in insurance costs against Nvidia’s debt coincided with a 4.99% drop in its stock price to $196.51, wiping out roughly $250 billion in market value and temporarily ceding the title of the world’s most valuable company to Apple Inc. This divergence between equity and credit markets suggests that while shareholders remain optimistic about long-term growth, lenders are pricing in heightened risks associated with Nvidia’s aggressive vendor financing strategies.

The immediate catalyst for this repricing was the report that Nvidia is negotiating to guarantee approximately $250 billion in financing for OpenAI’s planned 10-gigawatt data center campus in southern Ohio. Developed by SoftBank Group’s energy subsidiary SB Energy, the project is expected to cost more than $500 billion in total. Because OpenAI lacks an investment-grade credit rating, lenders require Nvidia’s balance sheet to backstop the debt. Additionally, Nvidia is discussing separate financing for up to $350 billion of OpenAI’s direct chip purchases. This structure represents a significant strategic pivot from direct equity investments to assuming substantial credit risk, raising concerns among analysts about potential circular financing dynamics within the AI sector.

Michael Burry’s Warning on Circular Spending

“Big Short” investor Michael Burry is sounding the alarm on Nvidia, claiming the AI giant’s strategic financial “overreaching” has escalated its “circular spending” to “biblical proportions.” Taking to X on July 29, 2026, Burry pointed to a sharp rise in the cost of insuring Nvidia’s debt as a glaring warning sign. “There is a reason $NVDA’s 5 year credit default swaps are going parabolic,” Burry posted, sharing a terminal chart showing the swaps up nearly 90% year-to-date.

He attributed this sudden surge directly to “All this overreaching by #nvda to push the circular spending to biblical proportions.” This criticism coincides with reports that Nvidia signed data center leases worth up to $50 billion in Texas to support its “neocloud” partners—a financial maneuver that skeptics argue keeps high costs off Nvidia’s balance sheet while artificially driving demand for its own GPUs.

Historical Precedent and Market Skepticism

Seaport Research analyst Jay Goldberg warned that such vendor financing arrangements often backfire, drawing parallels to Lucent Technologies’ aggressive lending strategy during the late 1990s telecom boom. Lucent lent billions to telecom carriers to buy its equipment, fueling rapid sales but leaving it with massive bad debts when the bubble burst, eventually leading to its merger with Alcatel in a $13.4 billion deal. Goldberg stated that if the Nvidia-OpenAI arrangement proceeds, it would be difficult to justify from Nvidia’s perspective, noting that “these kinds of financing usually don’t end well.” Hammerstone Markets compared these interlocking deals to Ponzi schemes due to their reliance on continuous capital inflows and fear of missing out.

Applied Economics Professor Steve Hanke echoed the bearish sentiment, definitively declaring: “WELCOME TO THE AI BUBBLE,” following reports of massive Nvidia investments in entities like SK Hynix Inc. ADR and OpenAI.

Scale of Exposure and Global Impact

The scale of the proposed guarantees has spooked credit desks. Nvidia’s latest 10-Q filing discloses only $3.5 billion in maximum exposure across all its facility lease guarantees. The reported $250 billion backstop for OpenAI would run roughly 71 times its current guarantee book, dramatically increasing its off-balance-sheet liabilities. This nervousness has spilled beyond Nvidia, contributing to a broader selloff in tech stocks. Alphabet Inc.’s free cash flow swung to negative $5.9 billion last week after raising its 2026 capital expenditure guidance to as much as $205 billion, marking its first quarterly outflow since 2004.

The selloff extended globally, with a Bloomberg gauge of Asian chip shares slumping 7.5% in its biggest drop since April 2025. South Korea’s Kospi sank as much as 11%, and SK Hynix fell more than 14% in Seoul, days after announcing a $500 billion-plus partnership with Nvidia for AI factories and next-generation memory.

Timeline of Circular Financing Deals

This development is the latest in a pattern of Nvidia providing capital that is subsequently spent on its own hardware or cloud capacity. Key milestones include:

What the Numbers Show

The proposed financing structure underscores a deepening dependency on vendor credit within the AI supply chain. With Nvidia potentially backing $250 billion in debt and negotiating another $350 billion for chip purchases, traditional banking channels appear insufficient for such large-scale projects without manufacturer guarantees. This concentration of risk amplifies volatility; if OpenAI’s revenue projections do not meet expectations, Nvidia’s balance sheet could face immediate strain. Prediction markets on Polymarket currently assign an 18% chance that the AI bubble bursts by the end of 2026, a figure that has ticked higher recently. Despite Monday’s slide, traders still favor Nvidia at 49% to reclaim the title of the world’s most valuable company by year-end, suggesting that while credit risks are rising, equity confidence remains resilient pending further earnings guidance from peers like Meta and Amazon.