Bond King Gundlach Sounds Alarm on Nvidia's $500 Billion Debt Bubble

Jeffrey Gundlach, known as the 'Bond King', has taken aim at Wall Street's latest financial engineering trend involving Nvidia (NVDA). He criticizes a consortium of major private credit and asset management firms, including Apollo, BlackRock, Blackstone, KKR, and Goldman Sachs, for issuing long-term debt backed by Nvidia's graphics processing units (GPUs) as collateral.

Gundlach argues that this is similar to securitizing 'warehouses of newly engineered bananas', meaning the GPUs may become technologically obsolete or vastly diminished in value within a few years. He notes that Nvidia's product refresh cycles run on a fast 18-month to 24-month round trip, creating a huge mismatch between debt duration and collateral value.

The Bond King warns that when market tops form, they rarely ring a bell, instead showcasing financial innovation relying on dubious ratings to turn speculative tech capital expenditures into a pseudo-safe asset class. Mark Cuban responded in agreement, comparing 'chips as an asset class' to the 2008 financial crisis and 1987 stock market crash.

Nvidia is a central part of the ETF landscape, with over 475 U.S.-listed exchange-traded funds (ETFs) owning NVDA. If debt markets re-price the risk on private credit platforms funding these mega-purchases, hyperscaler access to easy leverage may shrink, decelerating hardware sales growth towards realistic end-user demand.