Nvidia and Six Asset Managers Launch $500 Billion AI Chip Financing, Raising Pension Fund Risks
In episode 392 of Calcalist's Money Engines podcast, economist and chief strategist Uri Greenfeld discussed a new $500 billion financing mechanism announced by Nvidia CEO Jensen Huang alongside six major global asset managers: Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR. The innovative plan aims to transform AI chips from depreciating assets into infrastructure that can be leveraged and financed through dedicated financial vehicles.
Traditionally, data centers have been funded mainly by cloud giants' cash flows and Nvidia's own capital. However, as cloud companies face mounting construction commitments worth hundreds of billions of dollars, and smaller credit funds impose withdrawal limits, external capital has become necessary. The financing structure involves a special purpose vehicle (SPV) where Nvidia contributes about 20% of the equity, with the remainder coming from credit funds.
Crucially, the invested money does not belong to the asset managers themselves but to institutional investors and pension funds, including Israeli pension funds that have previously invested in these funds. This raises concerns that if revenues fall short or competition disrupts long-term commitments, the public, pension holders, may bear the brunt of reduced returns. Market signals reflect this risk, with Nvidia's credit default swap (CDS) rising from 0.4% to 0.8%, and Oracle's CDS jumping above 2%.
Additionally, Morgan Stanley announced a $1.5 trillion technology sector financing project, though none of the capital is its own. The podcast also covered recent weak U.S. employment data, persistent 3.4% annual inflation exceeding targets for five years, and bond market dynamics where long-term yields rise despite falling interest rate expectations, impacting Israel directly.
The episode included detailed discussions on the financing structure, the real owners of the funds, and broader economic indicators affecting markets and pension funds.
