By by Jack Denton

Nvidia stock was falling on Thursday alongside many others in the chip and AI space as the market continues to worry about the sustainability of spending on AI.

In a classic case of bad timing a reported deal involving Nvidia further underscores the possible fragility of "circular financing."

Nvidia stock fell 2.37% in premarket trading on Thursday, all but erasing a 2.5% rally from Wednesday which came as investors poured back into chip stocks and celebrated Nvidia CEO Jensen Huang's keynote at GTC Berlin.

Nvidia's declines match those across the chip and AI space as stock market sentiment once again looks to be shaky over the sustainability of AI spending, in part as investors digest late-Wednesday earnings from Tesla and Meta.

"Investors grapple with AI growth concerns, higher oil prices, and ongoing fiscal stress," said Henry Allen, an analyst at Deutsche Bank. "The latest earnings after the US close failed to reassure investors ... with tech stocks struggling to gain traction since."

The context makes it bad timing for a report about a major investment deal involving Nvidia to hit the wire.

Nvidia and Tesla will together invest some $2.8 billion in Samsung Electro-Mechanics to build factories making advanced chip substrates, Seoul's Maeil Business Newspaper reported. The report put Nvidia's portion of the investment at around $2 billion.

Barron's has reached out to Nvidia for comment on the investment.

As the stock market frets over AI spending and the sustainability of growth in the sector, reports of this Nvidia investment will do little to assuage concerns.

Investors have repeatedly raised the point that Nvidia appears to be engaging in "circular financing" -- investing in and lending to its customers and suppliers, creating a positive feedback loop of demand that may not reflect reality.

Samsung Electro-Mechanics would fit the bill. On Wednesday, before the Mail Business Newspaper report, the company announced a strategic partnership with Nvidia over production of its advanced chip substrates.

The report on Nvidia's investment makes total sense to seal the deal -- with Tesla a bonus addition to the party -- but does nothing to ease worries about the sustainability, or inter-connectedness, of AI spending.