Nvidia lists commitments totaling $530.5 billion, sparking concerns about its financial health. However, expert Robert Willens says, "The money is disbursed over many years and flows through the income statement." While Nvidia stock fell 2.2% on Friday, many of these commitments are simply payments to suppliers for expensive memory chips.
Did you know that Nvidia lists commitments and contingencies totaling $366 billion? And additional commitments of $56 billion? And another $108.5 billion in commitments to OpenAI? That adds up to $530.5 billion, a lot for a company that lists total liabilities on its balance sheet of $91 billion.
Well, yes. Because those figures are disclosed in quarterly filings. What’s more, most of that money has little to do with circular financing, where Nvidia supplies money to customers who buy its hardware.
The bulk of that $530.5 billion—some $279 billion—are commitments representing future payment to suppliers such as memory chip makers. The money is disbursed over many years and flows through the income statement, accounting expert Robert Willens says.
Nvidia didn’t respond to a request for comment about its accounting. Nvidia stock was down 2.2% in late trading on Friday at $162.56, leaving it down about 13% for the week. The S&P 500 was off 0.5%.
Broadcom reported $127 billion in similar purchase commitments. Its total balance sheet liabilities are $88 billion.
Both Nvidia and Broadcom’s purchase committments are rising partly because of the high cost of memory chips.
Neither number is all that concerning, or out of line. Nvidia’s chip business is roughly five times the size of Broadcom’s.
Nvidia’s commitments related to the AI buildout are closer to $200 billion, including more than $100 billion for OpenAI.
That is a lot of money, and circular financing is a risk to consider. But AI data-center hyperscalers are spending trillions, not billions. Most AI financing comes from cash flow, equity issuance, bonds, and loans.
Questions about Nvidia’s willingness to extend financing terms to customers are certainly valid. It’s just important to have the right numbers. Nvidia’s customer finance commitments are closer to $200 billion, not half a trillion.