OpenAI Locks In Lease for Huge Data Center in Ohio With Backing From Nvidia

OpenAI has signed a 10-gigawatt data-center deal in Ohio with SoftBank’s SB Energy that is partly backed by Nvidia, a project expected to become one of the largest artificial-intelligence hubs to date.Groundbreaking for the southern Ohio data-center complex in March.The deal is backed by a commitment from Nvidia aimed at helping the developer raise debt financing without exposing the chip maker to a substantial amount of risk, people familiar with the matter said.Nvidia has agreed to backstop a portion of the value of the completed data center at the site, starting with the first phase of the project, which represents around 5 gigawatts of power. In return for its commitment, Nvidia will be the exclusive chip provider for the first half of the Ohio site and take an equity stake in SB Energy, the people said. Nvidia has the option to expand its commitment later on to the full campus.OpenAI’s 20-year lease, parts of which were announced Monday, is the latest complex transaction aimed at helping an AI firm secure an enormous amount of computing capacity. Chip firms including Nvidia and Google have increasingly agreed to use their robust balance sheets to help startups such as OpenAI and Anthropic sign leases that developers can raise debt against while trying to manage their own risk.The southern Ohio campus is partly located on a former uranium-enrichment site owned by the U.S. Department of Energy and is expected to generate enough energy to power seven million homes. Commerce Secretary Howard Lutnick and Energy Secretary Chris Wright have been deeply involved in the project.Nvidia’s support is intended to make the project easier and less expensive to finance by giving lenders greater confidence that the data centers would retain value even if OpenAI were no longer the tenant, the people with knowledge of the deal said. Nvidia’s commitment is structured to require a series of mitigation steps before the chip maker would be obligated to make any payments.For instance, if OpenAI were to walk away from the project, SB Energy would first try to lease the site to another customer for the same price, some of the people said. If SB Energy wasn’t able to find another suitable tenant, the firm would try to sell the site, and Nvidia would pay any difference in the value, up to $105 billion if the initial phase is completed.By backing the asset value of the data center—not OpenAI’s ongoing lease payments—the structure limits Nvidia’s risk exposure substantially, those people familiar with the deal said. The chip giant’s guarantee covers completed data centers, not facilities under construction.Nvidia is expected to reap commercial benefits from the project in the near term. The company plans to sell hundreds of billions of dollars’ worth of chips into the initial phase of the Ohio facility, people with knowledge of the deal said. It has discussed providing financing for OpenAI’s purchase of its chips for the campus.The lease signing caps weeks of negotiations. In recent days, OpenAI, SB Energy and Nvidia reworked the scale of the backstop to address investors’ concerns about the chipmaker’s risk exposure, the people said.Morgan Stanley advised Nvidia on the deal.As part of the arrangement, Nvidia said it agreed to make a $1.5 billion equity investment in SB Energy. SB Energy, which is majority owned by Japan’s SoftBank and counts OpenAI as an investor, is working with bankers on an IPO as soon as next month, people familiar with that planned deal said, aiming to raise between $5 billion and $7 billion.Nvidia initially planned to guarantee all 10 gigawatts of OpenAI’s data-center commitments upfront, which could have totaled around $250 billion, The Wall Street Journal reported. Nvidia shares fell 5% in late July, after the Journal earlier reported the discussions of the $250 billion guarantee.The data-center campus will rely on the construction of a 9.2-gigawatt natural-gas plant, which is owned by the U.S. government and financed by Japan under a recent trade deal.Write to Anissa Gardizy at anissa.gardizy@wsj.com