Nvidia’s roughly $500 billion financing plan is meeting skepticism on Wall Street, Reuters reports. The model is designed to help artificial intelligence companies fund access to computing capacity through loans backed by chips.
Nvidia wants its graphics processors to be treated as an infrastructure-style asset that is attractive to investors. But banks and credit investors are questioning whether those assets can hold value well enough over time to support long-term lending.
According to Reuters, the main concern is the useful life and residual value of the GPUs. Nvidia says its chips can generate revenue for up to 10 years, while banks typically use depreciation periods of 3-4 years because there is not enough historical data to assess the long-term value of such assets with confidence.
As a result, lenders are likely to demand higher interest rates, larger capital buffers and stronger guarantees. Nvidia had initially assumed that some deals might include a residual value guarantee of up to 25%, but sources told Reuters that the multi-billion-dollar transactions now under discussion will likely require broader guarantees.
In some cases, customer contracts and Nvidia’s own guarantees could also form part of the collateral package. The success of the model will depend on whether the company can persuade lenders of the long-term value of its graphics processors.
