Nvidia this week unveiled $500 billion in third-party capital for AI infrastructure, drawing mixed reactions on Wall Street. Morgan Stanley says the plan could become a large, predictable revenue stream and estimates it could add as much as 60% upside to Nvidia's FY28 EBIT.
A $500 billion neocloud push
Nvidia this week unveiled $500 billion in third-party capital for AI infrastructure, partnering with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR. Nvidia said the move would let compute be treated as an investable asset.
The financing announcement drew varied reactions on Wall Street, with Michael Burry calling the plan a stunt and other analysts raising concerns over the circular nature of AI deals.
Morgan Stanley stays bullish
Morgan Stanley, however, struck an optimistic tone. According to Morgan Stanley: "We are definitively on the optimistic side, seeing a large annuity potential with limited downside." Analysts led by Joseph Moore said Nvidia remained their top pick in semiconductors and that they were enthusiastic about the initiative.
The analysts said compute demand would likely go underserved without the new financing structure, and that broadening spending should keep Nvidia the industry standard heading into a major Vera Rubin product cycle.
The revenue math
Morgan Stanley's tech teams estimate the four biggest U.S. hyperscalers will bring on about 25 gigawatts of compute in 2027, excluding Tensor Processing Unit capacity. A neocloud ecosystem of similar size, monetizing at $20 million per megawatt, would generate $500 billion of annual revenue, the bank estimated.
If Nvidia captured a quarter of that as 100% margin revenue, the analysts said it would drive 60% upside to their FY28 EBIT estimates, or 25% upside to FY29 without any change to Nvidia's initial sales. At a smaller scale of two to five gigawatts, they said the deal could still add about a 10% uplift to earnings per share.
Source: Investing.com
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