Wall Street Challenges Nvidia on AI Chip Valuation in $500 Billion Financing Plan

Wall Street lenders are challenging Nvidia’s (NVDA) valuation of its advanced AI hardware assets, raising questions about how much its cutting-edge chips are truly worth. Nvidia’s $500 billion financing plan, which uses AI chips as loan collateral for developers, is facing scrutiny. Some lenders argue that Nvidia’s estimate of the chips’ value is too high and want stronger guarantees, such as covering all deals or securing payments from investment-grade customers.

The core disagreement centers on the lifespan of Nvidia’s GPUs. Nvidia asserts that its top GPUs can generate revenue for a decade, while banks typically amortize GPU costs over three to four years. Tony Trzcinka of Impax Asset Management noted that Wall Street remains “much more conservative” in its assessments. Despite the pushback, demand to finance these deals remains strong.

Nvidia has defended its position, calling its AI compute a “productive, durable and fungible asset.” The company also cited studies showing that cloud firms extend server lifespans to five or six years. However, lenders argue that there is insufficient long-term data to support Nvidia’s valuation claims.

Analysts and investors will be watching whether lenders accept a longer lifespan for these chips and how financing terms evolve. Nvidia’s business fundamentals remain robust, with $96 billion in revenue last quarter and expectations of $108 billion next quarter. The company also forecasts 70% revenue growth in fiscal 2028, though it expects gross margins to drop to 71-72% due to higher memory costs.