Focus: Nvidia's bet that its chips can finance the AI boom gets a Wall Street reality check

BlackRock

01/10/2026 11:00

    * Investors skeptical about using chips as long-term
collateral
    * Deals in pipeline could offer more certainty including
stronger guarantees, sources say 
    * $500-billion chip-backed financing plan raised questions
amid AI boom
    * Company says asset is 'productive, durable and fungible' 

    By Saeed Azhar, Max A. Cherney, Isla Binnie and Stephen
Nellis
       NEW YORK, Oct 1 (Reuters) - Nvidia's mammoth financing
plan has opened a debate on Wall Street about how much its
advanced chips and the infrastructure around them are worth. The
answer for banks and investors seems to be: Not as much as
Nvidia thinks. 
    Some lenders want higher guarantees than the company had
originally outlined, even for Nvidia's industry-leading AI
processing power, as they try to calculate how long the revenue
from its chips will last, banking sources and credit managers
told Reuters, some requesting anonymity.
    The chips, which provide the critical processing power known
as "compute", are at the center of a potential mismatch in views
between Nvidia and a more cautious Wall Street, raising
potential future financing headaches for AI companies seeking to
tap deep new pools of capital. 
    The bankers and asset managers said they have some doubts
that the chips can act as long-term collateral as Nvidia says,
and therefore want more guarantees from the company on its
$500-billion financing plan that relies on chip-backed loans.
    Already, sources told Reuters, deals in the pipeline likely
offer investors more certainty including stronger guarantees. 
    "Wall Street is much more conservative," Tony Trzcinka, a
senior portfolio manager at Impax Asset Management, said of
Nvidia's claim that its most specialized chips can earn revenues
for a decade. 
    In a statement, an Nvidia spokesperson said that its "AI
compute is a productive, durable and fungible asset that can
support long-term financing. Our financing partners
independently assess each opportunity, including customer
commitments, expected cash flow and residual value."
    "Financing structures will vary as this market develops,"
the spokesperson added. 
     
    QUESTIONS OVER PLAN
    The questions over Nvidia's financing plan come as companies
and investors are pouring hundreds of billions of dollars into
data centers, chips and power capacity to support the broader AI
boom, which is driving US economic growth. That has increased
scrutiny of the more complex deals, and assumptions about the
longer-term value of computing hardware.
    Some have questioned the use of private credit, vendor
financing and circular deals, the last two of which played a
role during the dot-com boom and bust more than 25 years ago,
Morningstar analysts said in a recent note.
    Nvidia's plan, announced with financiers including
Blackstone, Apollo and KKR in August, had envisioned using chips
as collateral with limited guarantee in order to allow AI
developers a way to facilitate their access to Nvidia's compute.
The strategy was seen as an expensive but necessary way to
create a financing market similar to that used in the leasing of
aircraft. 
    Nvidia has said that some of the deals could have no more
than a 25% residual value guarantee, saying the initiative is
designed to address concerns around circular financing.  
    This was seen as offering less support than other recent AI
financing deals, raising expectations among some on Wall Street
that Nvidia would need to get more creative.
    Three banking sources, who were familiar with the matter but
not part of the original financing group, said Nvidia may need
to offer guarantees on all of its deals, or they may have to be
backed by a revenue stream from investment-grade customers such
as a technology firm to cover the debt. 
    For now, they told Reuters, the market is not ready to treat
the chip-maker's compute as an investment-worthy asset akin to
aircraft. 
     
    MORE CERTAINTY
    Nvidia is seeking to ease these concerns, the sources added,
giving details that had not previously been reported. 
    Tens of billions of dollars of loan deals in the pipeline
are likely to have strong guarantees and contracts, one
source said. A second source said that some structures being
explored would potentially give lenders guarantees. 
    These initial deals will give AI developers access to the
company's compute, and they are secured by Nvidia's own chips
and will be backed by customer contracts and by Nvidia's
underlying guarantee, said the first source.
    Despite the concerns over guarantees, there remains high
demand to finance the deals, the sources said. 
    The Nvidia spokesperson did not directly address Reuters'
questions about potentially expanded guarantees. 
    Chief Executive Jensen Huang has said he aimed to
make Nvidia's compute "an investable infrastructure asset", as
opposed to the typical system of customers buying subscription
contracts to AI firms in order to get access to the compute.
    Huang said in a blog post in August that the $500-billion
initiative was designed to address concerns about circular
financing, or when a company helps finance purchases of its own
products. It brings independent institutional capital into the
AI infrastructure market, while Nvidia's financial partners
raise money from investors to support loans, he said. 
    A third banking source said that lenders and private capital
are expected to play a role in this funding. 
    Five of the company's six financial partners declined to
comment for this article, while Apollo did not respond to a
request for comment.  
     
    CHIP LIFE
    The CEO addressed some skepticism when he said in the post
that Nvidia's graphics processing units, or GPUs -- specialized
chips whose compute is used to train and run AI models -- have a
useful life of up to a decade. 
    Some credit investors and bankers see a more modest lifespan
of chips generating revenue.
    "Nvidia would imply that the GPUs work well north of five
years, and that actually has been proven to be true thus far,"
said Andrew Chang, a director at S&P Global Ratings. Yet "we
take a conservative view of the value of those chips," he said.
    The first banking source said that part of the divergence in
views with the company is that there still isn't enough
historical data for lenders to confidently underwrite long-term
residual value based on GPUs. 
    "Banks typically underwrite GPUs over a 3-4 year
depreciation schedule," said Trzcinka of Impax.
    "That is different than Nvidia which argues top-tier GPUs
can earn revenue for a decade," he said, adding investors are
likely to seek higher interest rates, bigger financial cushions
and stronger repayment protections before backing loans secured
by AI chips. 
    "As investors, you're going to be a lot pickier about the
levels that you need to get compensated for to take incremental
risk," said Loren Moran, fixed income portfolio manager at
Wellington Management, with $1.3 trillion in assets under
management.
    Nvidia pointed to several third-party studies that showed
major cloud companies extending the depreciation periods for
servers up to five to six years, from three to four.  
    It also pointed to a finding from Barkr, a firm that
provides valuations for AI collateral such as GPUs, that the
company's most recent GB300 NVL72 systems could have a useful
life of 9 to 10 years. 
     
    CHIP-BACKED LOANS 
    Some companies have tested the market with chip-backed
loans, but, unlike Nvidia's, these deals were backed by revenue
from a technology firm to support debt payments.
    CoreWeave, in which Nvidia has a stake, closed an
$8.5-billion facility in the first investment grade GPU-backed
loan earlier this year. The loan is rated A3 largely because
lenders rely on Meta's contractual payments, which are viewed as
highly dependable. 
    Separately, Broadcom, an Nvidia rival that is helping
finance AI computing capacity for Anthropic, backstopped more
than 80% of a $35-billion financing structure, helping to
attract debt investors. 
    Nvidia itself previously provided a residual-value guarantee
to support financing for SB Energy's Ohio data-center project,
according to S&P and Moody's. 
    "The precedent transactions so far would suggest that the
creditor community does not subscribe to long average lives for
these assets," said Brian Gelfand, co-head of global credit at
TCW, which manages more than $200 billion.

    (Reporting by Saeed Azhar and Isla Binnie in New York and
Max A. Cherney and Stephen Nellis in San Francisco; additional
reporting by Gertrude Chavez-Dreyfuss; editing by Megan Davies
and Jonathan Spicer )
((mailto:Saeed.Azhar@thomsonreuters.com; +1 347 908-6341;
Reuters Messaging: rm://saeed.azhar.reuters.com@reuters.net/))