Nvidia has reached an agreement with Wall Street giants to invest $500 billion in its customers

Nvidia has partnered with six institutional investors to secure investments in artificial intelligence infrastructure. The company, which has itself become the primary beneficiary of AI spending, intends to “mobilize” $500 billion in capital, which will essentially go to its customers.

Nvidia has signed memorandums of understanding with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to establish platforms for computing financing. The company said the agreements will enable it to “create specialized capital pools of significant scale at attractive rates” for its customers.

The company did not disclose the financial terms of the agreements, the amount of investment commitments from individual participants, or the timeline for raising and allocating the planned $500 billion, Reuters notes.

The Financial Times was the first to report on the plans of Nvidia and the asset management consortium on August 10. Separately, the publication’s sources reported that Nvidia was in talks to provide a large-scale guarantee for a 10-gigawatt data center project in Ohio, which OpenAI will lease.

The chipmaker's stock fell 2.9% during trading on August 10 following the FT's report on a new initiative by Nvidia and investment funds, causing the company's market capitalization to drop by more than $140 billion.

The chipmaker’s initiative will expand access to Nvidia-based infrastructure for AI model developers, companies, governments, and cloud providers, according to an Nvidia press release. At the same time, it will provide asset managers with opportunities for long-term investments, the returns on which will be tied to the use of computing power.

“These financial platforms will help customers gain large-scale access to scarce computing resources and build AI factories that will power every industry and every country in the age of artificial intelligence,” said Nvidia CEO Jensen Huang, according to a company statement.

Future transactions will be characterized by “high credit quality” and will allow investors who have “invested too heavily in stocks” to earn attractive returns on debt instruments, BlackRock CEO Larry Fink said on CNBC.

“We’re talking about large-scale infrastructure construction, and the capital markets show that there are plenty of funds available to finance it,” Bloomberg quotes Goldman Sachs CEO David Solomon as saying. According to him, the bank is exploring various ways to “channel capital where it is needed to continue or accelerate this process.”

This project underscores Nvidia’s growing efforts to raise capital—both for itself and for its customers—to continue building the infrastructure of chips, power capacity, and data centers that underpins the artificial intelligence boom, the FT notes. The chipmaker frequently provides financial support to its AI partners, helping them raise debt capital in the capital markets, which, in turn, contributes to the growth of Nvidia’s own revenue. However, such circular deals raise concerns about the concentration of risk in the industry, the publication notes.

The partnership also illustrates how Nvidia is building relationships with the major players in the private equity industry. Collectively, they are preparing to invest trillions of dollars from insurance companies, retail investors, and institutional investors into AI infrastructure, according to the FT.

Nvidia has been the main beneficiary of the explosive growth in interest in artificial intelligence: demand for the company’s latest hardware far exceeds supply. Chips account for the bulk of the cost of new computing power. The largest companies in the cloud computing sector, including Meta, Oracle, Microsoft, Alphabet, and Amazon, have sharply increased their spending on AI infrastructure in an effort to win the race for leadership in this new technology. Since late 2022, when OpenAI released ChatGPT, Nvidia’s market capitalization has increased 15-fold.

According to a Morgan Stanley forecast, hyperscalers will spend $3.5 trillion between 2026 and 2028, the FT reports. The enormous need for capital is forcing technology companies to turn to all available sources of financing, including the public equity market, investment-grade and high-yield bonds, securitized debt, private credit, and project financing.

“The scale of AI infrastructure development is unprecedented,” Apollo President Jim Zelter said on August 4 during a conference call to discuss the quarter’s results. “More than $8 trillion is expected to be invested—a staggering amount. We see enormous opportunities for private capital to finance a portion of these investments alongside public capital.”

This article was AI-translated and verified by a human editor