RESOLVING THE LEDGER
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See the full story · 2 sourcesNvidia is turning to some of the world’s biggest financial groups to help fund the next phase of the artificial intelligence boom. Six Wall Street giants have joined the effort, which could raise more than $500 billion for AI infrastructure.The firms: Apollo Global Management, Blackstone, BlackRock, Brookfield Asset Management, Goldman Sachs and KKR have signed memorandums of understanding with Nvidia to develop financing platforms for companies buying its hardware and building data centres, Nvidia said on Monday.The proposed pools of capital will support hyperscalers, frontier AI labs and enterprises, with financing aimed at Nvidia’s chips as well as the data centres needed to run them. According to a FT report, the agreement is still subject to final terms.Why Nvidia is turning to Wall Street for AI fundingThe move represents Nvidia’s effort to bring institutional credit, insurance money and private capital into the financing of AI computing infrastructure. The company says the initiative will mobilise more than $500 billion in third-party capital over time.Nvidia founder and chief executive Jensen Huang believes the nature of the company’s chips makes them suitable for financing in much the same way as other productive assets.“This is really the first time that technology chips have become an investable asset class,” Nvidia founder and CEO Jensen Huang told CNBC. “These are revenue-generating assets now. They’re productive, they’re long-lived, they’re fungible, they’re flexible.”Huang said Nvidia’s hardware is widely used and can be transferred between customers, allowing lenders to view computing capacity as an asset capable of generating revenue over an extended period.“Fundamentally, what’s different about this industry and this way of doing computing is that the computer is now part of the infrastructure, like electricity, like the internet, and so you have to think about it like it’s infrastructure,” Huang said in the CNBC interview.Nvidia described the agreement as the first of its kind and said it would help finance AI infrastructure across its ecosystem, including leading frontier AI labs, enterprises and AI clouds.“We began by building chips; today, we are helping create a new class of productive, investable infrastructure: AI factories,” Jensen Huang, founder and chief executive of Nvidia, said in a news release on Monday afternoon.Wall Street’s AI betThe partnership gives some of the biggest private capital managers a direct role in financing the expansion of AI infrastructure.Blackstone president and chief operating officer Jon Gray said AI computing could be treated as a “financeable asset class” in the same way mortgage lenders assess homes. He said demand for AI was exceeding supply, while usage at Blackstone portfolio companies had increased sevenfold this year.“We continue to be enormous investors globally across the Nvidia ecosystem, and this announcement further underscores our confidence in their platform and the future of AI infrastructure,” said Jon Gray, president and chief operating officer of Blackstone. BlackRock chief executive Larry Fink said he saw the initiative as the beginning of the “next future for financial engineering”, drawing a comparison with the creation of mortgage-backed securities in the 1970s.Some funds have already been raised, Fink said, while BlackRock would be “raising quite a bit more”.“We need to raise this money as fast as possible and put this to work, because I think it’s really imperative that the United States is the leader in AI in the world,” Fink said on CNBC.Goldman Sachs chief executive David Solomon said the group was entering the market at a significant point in the AI investment cycle.“We’re in a pivotal moment of a historic AI investment cycle,” Solomon said in the release. “Our investment and distribution roles reflect our confidence in NVIDIA’s leadership, and we’re excited for the new opportunity to create a market for credit backed by NVIDIA compute.”Solomon told CNBC’s Becky Quick that Huang had approached the Wall Street firms with the idea for the financing project.Private capital groups such as Apollo and Blackstone have already arranged AI infrastructure deals to help companies including Anthropic fund spending on chips and data centres. They have also developed multibillion-dollar, investment-grade-rated financing for companies such as Meta and Intel that sits outside their corporate balance sheets.Nvidia’s push comes at a time when investors have also been scrutinising the scale of AI investment. A July market downturn prompted questions over whether Big Tech’s spending on AI would pay off, while rating agencies such as Moody’s have warned that unprecedented capital expenditure is putting pressure on free cash flow and increasing technology companies’ debt burdens.Nvidia’s growing role in AI fundingThe chipmaker’s involvement goes beyond supplying the hardware. Nvidia frequently provides financial backing to help AI partners raise debt in capital markets, supporting their spending while also helping Nvidia generate revenue.That model has raised concerns over concentrated risks in the sector because of the circular nature of some such transactions.Nvidia was also in talks to provide a massive guarantee for a 10-gigawatt data centre project in Ohio leased to OpenAI, according to a person familiar with the matter. The company has emerged as one of the biggest beneficiaries of the AI boom as demand for its latest hardware has significantly outpaced supply. GPUs account for most of the cost of new computing capacity, while Nvidia supplies chips, infrastructure and software to a wide range of companies developing AI technology.Nvidia’s market capitalisation has grown 15-fold since the end of 2022, shortly after the release of OpenAI’s ChatGPT. The company was valued at $5.26 trillion.Its shares fell about 1.1% on Monday after the FT reported the financing arrangement, wiping nearly $60 billion from its market capi...
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