Why Nvidia stock is sinking around 4% on Monday

Nvidia NVDA shares fell around 3% early Monday as investors assessed a series of artificial intelligence infrastructure deals involving OpenAI and SK Hynix.

The stock traded around $198.86 after declining 0.9% in the previous session.

Other semiconductor stocks also traded lower, with AMD down about 4% and Intel falling roughly 2%.

Investors digest massive AI financing plans

Investor attention focused on reports that Nvidia is discussing financing arrangements that could underpin more than $750 billion of artificial intelligence infrastructure investment.

According to The Wall Street Journal, Nvidia is in talks to provide roughly $250 billion in financing guarantees to OpenAI to support the lease of a 10-gigawatt data centre being developed by SoftBank subsidiary SB Energy in southern Ohio.

The report said the guarantee would help reassure lenders financing the project, which is expected to cost more than $500 billion in total.

Nvidia is also reportedly discussing financing up to $350 billion of OpenAI's future chip purchases for the project.

The arrangement would allow OpenAI to begin controlling more of its own computing infrastructure instead of relying on cloud providers, including Microsoft, Amazon, and Oracle, while securing long-term demand for Nvidia's processors.

Separately, Nvidia announced an artificial intelligence infrastructure initiative with the parent company of South Korean memory chipmaker SK Hynix that it said is worth more than $500 billion.

Financing strategy draws scrutiny

The growing scale of Nvidia's financing initiatives has renewed debate over whether the company is helping create demand for its own products.

Critics have argued that Nvidia's investments, financing arrangements, and equity stakes in AI companies may artificially support demand for its chips and inflate valuations across the sector.

Concerns centre on whether financing-backed infrastructure projects could create distorted incentives or amplify risks if demand for artificial intelligence services ultimately falls short of expectations.

BofA remains bullish on Nvidia stock

Despite those concerns, Bank of America Securities reiterated its Buy rating and $350 price target on Nvidia.

The firm said Nvidia's support for both open-source AI models and proprietary developers such as OpenAI reflects a strategy aimed at maximising demand across the broader AI ecosystem.

According to Bank of America, open-source models encourage adoption among enterprises, sovereign customers, and startups, while OpenAI remains one of the largest consumers of AI infrastructure.

The firm said the combination should accelerate graphics processing unit demand and expand Nvidia's ecosystem, although investors are increasingly questioning how much industry spending is being driven by underlying demand versus financing support.

Bank of America also noted that frontier AI laboratories account for about 20% of Nvidia's data centre revenue, with the remaining sales coming from a broader customer base.

The firm identified the principal bear case as the potential for financing-assisted demand to compress Nvidia's valuation multiple as investors reassess the sustainability of AI spending.

Nvidia has recently begun to narrow its performance gap with the broader semiconductor sector.

The stock is up about 3% in July while the PHLX Semiconductor Index has fallen 17%.