Nvidia seeks to raise over $25B in first bond deal since 2021
Chipmaker Nvidia announces its first bond issuance since 2021, aiming to raise more than $25 billion. The company, despite strong free cash flow, is seeking alternative financing as market concerns grow over interconnected risks in the AI ecosystem.
Nvidia, the leading supplier of AI chips, is launching its first bond deal since 2021, planning to raise over $25 billion. This move comes as other tech companies explore diverse financing avenues—for instance, Anthropic turned to private credit investors to seal a $35 billion deal backed by Broadcom, while Google's parent Alphabet issued equity for the first time in over two decades, raising $85 billion.
Nvidia's financial position remains robust, with free cash flow jumping 59% to $96.6 billion in the year through January. However, after its valuation peaked at about $5.7 trillion in May, its shares have fallen alongside the broader semiconductor market in recent weeks, with its market capitalization dropping below $5 trillion at the end of last week.
Nvidia is not only reaping huge profits from AI spending but has also become a significant investor in AI companies, committing over $90 billion to developers such as OpenAI, Anthropic, and xAI, as well as suppliers including Coherent, Marvell, Lumentum, and Corning. In some cases, it has agreed to act as a financial guarantor for customers building cloud computing services using its chips, including CoreWeave and Nscale.
The increasing use of financial guarantees and the interdependence of AI companies have raised concerns about concentrated risks among bond investors. Tom Murphy, global head of investment-grade credit at Columbia Threadneedle Investments, noted that the market has started to worry about these circular financings, because if someone in that ecosystem has a problem, it could affect the whole system.
Nvidia has a double-A credit rating, the third-highest score. In comparison, more indebted AI player Oracle sits just two notches above a junk rating. Goldman Sachs, JPMorgan, and Morgan Stanley are active bookrunners of the transaction.
