Wall Street questions Nvidia’s $500 billion chip plan: ‘not as much as the company thinks’

Nvidia’s mammoth financing plan has opened a debate on Wall Street over the true value of its advanced chips and the infrastructure around them — and the answer from banks and investors, according to Reuters reporting, appears to be: not as much as the company thinks.

Some lenders are demanding greater guarantees than the company had initially anticipated, even for industry-leading AI processing power, as they try to calculate how long chip revenues 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 of views between Nvidia and a more cautious Wall Street — friction that, as Reuters notes, could cause future financing headaches for artificial intelligence companies seeking to tap new deep pools of capital.

Bankers and asset managers doubt that the chips can serve as long-term collateral, as Nvidia claims, and are therefore demanding more guarantees from the company for its $500 billion financing plan backed by chip-secured loans. According to the sources, upcoming deals are already offering investors more security, including stronger guarantees. “Wall Street is much more conservative,” Tony Trzcinka, a senior portfolio manager at Impax Asset Management, told Reuters of Nvidia’s claim that its most specialized chips could generate revenue for a decade.

An Nvidia spokeswoman told Reuters that “AI compute is a productive, durable and fungible asset that can support long-term financing,” adding that financial partners “independently evaluate each opportunity, including customer engagements, expected cash flows and residual value.” CEO Jensen Huang has said he aims to make Nvidia’s compute “an investable infrastructure asset,” as opposed to the typical system in which customers buy subscription contracts to access processing power.