Chipmaker Nvidia seeks to raise over $25B in first bond deal since 2021

Early signs of market fatigue have prompted some tech companies to find alternative avenues for financing.

Anthropic has turned to private credit investors to seal a $35 billion deal backed by Broadcom. Google’s parent Alphabet decided to issue equity for the first time in more than two decades, bringing in $85 billion in fresh capital earlier this month.

Nvidia’s position as the AI industry’s go-to supplier of the powerful chips needed to build large language models such as OpenAI’s GPT has proven extremely lucrative for the Silicon Valley company, with its free cash flow in the year to January leaping 59 percent to $96.6 billion.

However, after its valuation peaked at about $5.7 trillion in May, its shares have fallen alongside the wider semiconductor market in recent weeks, with its market capitalization dropping below $5 trillion at the end of last week.

While reaping huge profits from AI spending, Nvidia has also become a significant investor in AI companies, committing a total of more than $90 billion to developers, including OpenAI, Anthropic, and xAI, and suppliers, including Coherent, Marvell, Lumentum, and Corning. In some cases, it has also agreed to act as a backstop or financial guarantor to 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, said Tom Murphy, global head of investment-grade credit at Columbia Threadneedle Investments.

“The market has started to get worried about these circular financings, because if somebody in that ecosystem is having a problem, then the whole thing could be a problem,” Murphy said.

Nvidia has a double-A credit rating, the third-highest score. 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.

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