This is bad news for the AI boom's financing model and for US-China tech relations, as Nvidia's circular funding scheme shows cracks right as Washington moves to cut China off from advanced chips.

• Treasury Secretary Bessent is pushing hard to block China from getting advanced AI chips, closing loopholes like smuggling and rented overseas computing power.
• Nvidia has been acting like a bank for the AI industry, lending and guaranteeing money to companies that then use it to buy Nvidia chips, which boosts Nvidia's own reported revenue.
• With Jensen Huang's exit, the new Nvidia leadership is reportedly cutting back these financing deals, raising fears that smaller AI firms could struggle without the cash support.
• Borrowing costs for data center buildouts are rising as bond yields climb, squeezing profit margins just as competition from cheaper Chinese AI models grows.
• China dominates cheap AI model usage worldwide, and Washington is framing Chinese open-source models as risky, partly to push users toward more expensive US-controlled alternatives.

Outlook: Expect tighter US restrictions on chip exports to China alongside growing worries that reduced financing support could expose weaknesses in the broader AI spending boom.