Nvidia's Chip-Backed Financing Plan Faces Resistance from Wall Street

Nvidia's ambitious effort to turn its advanced AI chips into collateral for loans is facing skepticism from Wall Street lenders, who are demanding stronger guarantees and protections before committing capital.

The company had announced a $500 billion financing initiative in August with partners including Blackstone, Apollo Global Management, and KKR & Co., but lenders are pushing back on Nvidia's valuation assumptions.

Nvidia Chief Executive Jensen Huang argued that the company's specialized chips can generate revenue for up to a decade, citing third-party research showing cloud providers extend server depreciation periods to five or six years. However, bankers and asset managers take a more conservative view, assuming a depreciation schedule of just three to four years.

Lenders are seeking higher interest rates, bigger financial cushions, and stronger repayment protections before backing loans secured by AI chips, according to Tony Trzcinka, a senior portfolio manager at Impax Asset Management. This could impact the cost of financing AI infrastructure and slow data center build-out.