Nvidia Unveils $500 Billion AI Financing Plan With Wall Street Giants
Nvidia has signed memorandums of understanding with six investment firms to mobilize over $500 billion in third-party capital for AI infrastructure. The platforms are designed to create dedicated pools of outside capital for Nvidia's customers, allowing them to purchase hardware without using their own cash.
This is a significant move, as the telecom industry experienced a similar financing model in the late 1990s, where equipment suppliers lent money to customers to buy gear. However, this time around, the structure is different, and the money is coming from Wall Street firms like Apollo Global Management, BlackRock, Blackstone, Brookfield Asset Management, Goldman Sachs, and KKR.
Nvidia CEO Jensen Huang described the platforms as 'really the first time that technology chips have become an investable asset class.' The company's revenue has been growing rapidly, with a 71% increase in trailing-12-month revenue to $253 billion. However, rating agencies have warned that record capital spending is squeezing the big AI spenders' free cash flow and pushing them toward heavier debt loads.
The announcement leaves open who bears the credit loss if a compute-backed borrower defaults. The telecom precedent suggests that this could be a major issue, as 24 of the 30 largest publicly traded telecom carriers went bankrupt in the late 1990s, and an estimated one-third to 80% of the suppliers' loan portfolios were lost.