Nvidia's new financing partnerships with Apollo, Blackstone, Goldman Sachs and other investors are easing analyst worries about how closely the chipmaker's revenue depends on its own customers. Morgan Stanley's Joseph Moore said the deals ease circularity concerns, while Bank of America's Vivek Arya said they shift financial risk off Nvidia's balance sheet — even as Arya flagged fresh questions for the company's earnings call this month.
Nvidia announced Monday that it has formed strategic partnerships for independent compute financing worth more than $500 billion, aimed at supporting artificial-intelligence infrastructure development over time. Six firms, including Apollo Global Management, Blackstone and Goldman Sachs, will supply the third-party capital, the chip maker said.
CEO Jensen Huang said in a post on X that Nvidia could support up to 25% of an investment on a case-by-case basis.
Analysts say the deals ease circularity fears
Some investors have worried about how tightly Nvidia's finances tie to its customers. Morgan Stanley analyst Joseph Moore said, however, that Nvidia relying on outside funding for AI factories should arguably ease those circularity concerns. He added that the sophisticated third-party investor groups involved are calling the shots, which should reduce fears that the deals are driven purely by circular motivations.
Moore called the arrangement a potential positive for Nvidia given its position as a major driver of the AI ecosystem where the deals will happen. Nvidia said in a press release that the financing platforms turn its chips and other AI offerings into an investable asset class that will generate long-duration, usage-linked revenue. Therefore, Moore said, the deals likely fit into Nvidia's previously announced revenue-sharing model, letting the company grow with customers likely to remain entirely tied to Nvidia.
Bank of America analyst Vivek Arya took a similar view, saying the financial burden of the arrangement falls on the investor consortium rather than on Nvidia's own balance sheet. He said computing power can work as an investable asset because Nvidia's graphics processing units are interchangeable across AI developers and its CUDA software extends their useful life, which he expects to keep resale and rental prices for the chips high.
Earnings call looms as next test
Arya said Nvidia's earnings call later this month could give Wall Street "critically needed assurance on its go-forward role in vendor financing." That vendor financing eats into free cash flow that Arya said could otherwise go toward a stock trading at a valuation he called significantly depressed.
Nvidia's stock was down fractionally on Tuesday afternoon. Moore said the company's backstop for neocloud providers and sovereign AI, which he views as a credit risk, is the next big debate for the stock.
Source: MarketWatch
Trading involves risk.
Risk Disclaimer
