Author: Claude, Shenchao TechFlow
DeepInsight Summary: On July 27, the cost of NVIDIA’s five-year credit default swap surged intraday by approximately 14 basis points to 82 basis points—the largest intraday increase since the contract began active trading in November 2025. The move was triggered by reports from The Wall Street Journal that NVIDIA is negotiating to provide around $250 billion in guarantees for a 10-gigawatt data center in Ohio leased to OpenAI,叠加上周与韩国SK集团达成的5000亿美元意向书，一周内新增风险敞口超过7500亿美元。当日，NVIDIA股价下跌4.99%，全球市值第一的位置被苹果取代。
At the close of U.S. markets on July 27, NVIDIA fell 4.99% to $196.51, with its market capitalization dropping to approximately $4.77 trillion. Apple rose about 1% on the same day, with its market capitalization nearing $4.95 trillion, reclaiming the title of the world’s most valuable company. NVIDIA had taken the top spot from Microsoft in June 2025 and briefly surpassed $5 trillion in market value last October.
More telling than stock prices is the reaction in the credit markets. According to Bloomberg, data from ICE Data Services showed that the cost of buying five-year credit default protection on NVIDIA’s debt rose by as much as 14 basis points during Monday’s trading session, peaking at approximately 82 basis points per year—the largest intraday increase since the contract began active trading in November 2025.
Jumped 14 basis points in one day—the bond market reacted to NVIDIA's signature statement for the first time.
CDS is insurance purchased by bondholders to protect against issuer default; a higher quote indicates the market believes the likelihood of default is greater, or that greater compensation is required to assume this risk. A CDS spread of 82 basis points means that to buy five-year protection on $100 million of NVIDIA debt, the annual premium would be $820,000.
NVIDIA’s CDS only began active trading last November, so its history is very short, and the term “record” should be viewed with caution. Last week, Michael Kramer of Mott Capital Management estimated that a quote of 65 basis points roughly corresponds to a cumulative default probability of about 5% over five years—a relatively low absolute level. He also noted an unusual phenomenon at the time: NVIDIA’s CDS spreads widened while its stock price continued to rise. This divergence ended on Monday, as both stock and CDS prices moved downward together.
NVIDIA's credit rating remains near the highest tier. For the June bond issuance, Moody's assigned a rating of Aa1 (positive outlook), and S&P assigned AA.
$250 billion in collateral: OpenAI is borrowing against NVIDIA's balance sheet.
On July 26, The Wall Street Journal reported that NVIDIA is negotiating to provide approximately $250 billion in financing guarantees for OpenAI to lease a 10-gigawatt data center campus being developed by SB Energy, a subsidiary of SoftBank, in Piketon, Ohio. The guarantee covers the lease and construction debt but does not include the NVIDIA chips within the campus. Financing for the chip purchases is a separate negotiation, potentially reaching $350 billion. The total project cost, including chips, exceeds $500 billion, with the first phase of approximately 800 megawatts expected to come online in 2028.
The purpose of this guarantee is straightforward. OpenAI is valued at $852 billion but lacks an investment-grade credit rating and is still losing money. Lenders would not provide financing of this size and term based on OpenAI’s creditworthiness alone. Instead, NVIDIA’s AA-rated balance sheet steps in, allowing SB Energy to borrow at NVIDIA’s credit rating rather than at the tenant’s.
Scale is the issue. In its Q1 2027 10-Q filing, NVIDIA disclosed that the maximum total exposure limit for all partner facility lease guarantees is $3.5 billion, with $712 million held in custodial accounts. The company records these guarantees as credit derivatives and states their fair value is not material. $250 billion is approximately 70 times this amount, nearing NVIDIA’s total assets of $259.5 billion as of the end of April.
The difference between guarantee and investment lies in the profit structure: OpenAI pays on time, and NVIDIA earns nothing; if OpenAI fails to pay, NVIDIA covers the loss up to the guaranteed amount. This is a contingent liability with downside risk but no upside potential.
Adding SK Group's 500 billion, a total of $750 billion has been accumulated within a week.
On July 24, NVIDIA and South Korea’s SK Group announced the signing of a letter of intent for a collaboration valued at over $500 billion. The agreement includes SK Telecom building a 2-gigawatt AI factory powered by NVIDIA’s Vera Rubin DSX platform and SK Hynix’s HBM4 memory, with the first facility planned to come online in 2027; NVIDIA and SK Hynix will also establish a long-term memory supply and joint development partnership. Jensen Huang disclosed this figure during a meeting with South Korean President Yoon Suk Yeol in San Francisco, without specifying the calculation methodology or implementation timeline.
The two amounts combined exceed $750 billion. Bloomberg directly attributed Monday's CDS spike to this total, citing market concerns that NVIDIA is taking on an increasing number of obligations.
The Ohio project also has external dependencies that must be noted. The site is located on federal land, formerly a uranium enrichment facility operating from 1954 to 2001; SB Energy leased rather than purchased the land, bypassing the standard site approval process. Power supply relies on 9.2 gigawatts of newly built natural gas generation, along with a $4.2 billion transmission project with AEP Ohio, funded by Japan’s $33.3 billion commitment under the U.S.-Japan trade agreement. Commerce Secretary Lutnick holds authority over the allocation of this site’s power, and companies including Anthropic, Microsoft, and Google have recently approached him. This means that whether this guarantee materializes depends in part on factors outside the control of NVIDIA and OpenAI.
Oracle has reached 196 basis points; NVIDIA's 82 basis points are still not expensive.
Compared to competitors on the same track, NVIDIA remains in a strong position. Oracle’s five-year CDS spread rose to 196.6 basis points on July 20, reaching a record high in the company’s history and surpassing levels seen during the 2008 financial crisis; its stock has declined approximately 37% year-to-date. Kramer estimates that Oracle’s CDS implies a default probability of about 16%, up from just 3.5% in September last year.
The primary market was also not tight six weeks ago. On June 15, NVIDIA priced a $25 billion investment-grade bond, its first issuance since 2021, with orders reaching as high as $85 billion. The offering included seven tranches with maturities as long as 2056, coupon rates ranging from 4.250% to 5.625%, and spreads of 20 to 65 basis points over U.S. Treasuries.
What was actually sold off were stocks. The iShares Semiconductor ETF has declined 14% over the past month, while NVIDIA has risen only about 4% year-to-date, and Apple has gained approximately 24% over the same period. Apple’s strategy—avoiding heavy capital expenditures and relying on leased computing power—has outperformed the self-build approach this year.
For holders of NVIDIA, the 82 basis points themselves are not the signal—it’s the speed. It took just one trading day to move from 68 to 82 basis points, while Oracle took more than half a year to reach 196 basis points.
Circular financing has taken on a new form: from purchasing equity to signing guarantees.
NVIDIA has long used its own capital to support downstream demand. In January 2026, it invested an additional $2 billion in CoreWeave at $87.20 per share; in February, its original $10 billion commitment to OpenAI was replaced by a $30 billion investment in OpenAI’s $110 billion funding round in exchange for equity; in March, it invested $2 billion in Nebius and participated in Thinking Machines’ $2 billion financing round. At the time, Jensen Huang stated that OpenAI’s $30 billion and Anthropic’s $10 billion commitments might represent the largest equity checks ever issued.
Four months later, the same structure was replaced with a guarantee.
Wedbush’s Matthew Bryson said NVIDIA’s investment and construction efforts “fall squarely” within the cycle of investment that has raised market concerns about sustainability, while also acknowledging that, if executed well, this strategy could build a competitive moat. Mizuho’s chip analyst Jordan Klein put it more bluntly: “It smells like you’re prepaying for your own GPUs.” NVIDIA has consistently denied that its contracts require partners to use this money to purchase its chips.
Differences in accounting treatment explain why the bond market reacted first. Equity investments are recorded on the balance sheet, and guarantees are recognized as derivatives at fair value, only becoming actual cash outflows upon triggering. Such contingent liabilities do not appear under liabilities on current financial statements but are reflected in CDS quotes. This was the process on Monday.