Nvidia's $500 Billion Chip Financing Spree Sparks Debt Fears

Nvidia has launched an innovative financing program that allows companies to borrow large sums of money to purchase its AI infrastructure chips. The program, which has mobilized over $500 billion in third-party capital, treats computing power as a long-duration asset class similar to commercial real estate or toll roads.

This is a departure from the traditional way of depreciating hardware, where chips lose value rapidly with each new generation. Nvidia CEO Jensen Huang has described this as 'the first time technology chips have become an investable asset class.'

The program has already seen hyperscalers borrow around $250 billion this year alone, several times their normal annual borrowing. This layering of debt on top of existing leverage is a concern for some experts, who point to similarities with the 2008 financial crisis.

Huang's argument that compute power is now infrastructure, akin to electricity or the internet, may not be unreasonable, but the underlying risk remains uncertain. GPUs have historically been seen as rapidly depreciating hardware, and newer chip generations arrive quickly.