Nvidia shares were rising on Wednesday as fears about the company's exposure to debt fueling the artificial intelligence (AI) boom eased. CEO Jensen Huang once again appears to be a market whisperer.
Nvidia CEO eases fears about debt linked to AI and stock rises in NY
Nvidia shares were rising on Wednesday as fears about the company's exposure to debt fueling the artificial intelligence (AI) boom eased. CEO Jensen Huang once again appears to be a market whisperer. At around 3:10 pm (Brasília time), the...
Hyperscalers like Alphabet, Amazon, Meta and Microsoft – which provide the massive cloud computing and data infrastructure behind AI – have taken on massive debt to finance their expansion. As a result, the cost of insuring its debt against default via credit default swaps, or CDS, has risen in recent months, rattling bond watchers on Wall Street.
- The worry is that if the AI boom doesn't deliver as much as expected, bondholders will be left with a loss.
- Nvidia has not been spared these concerns because it is guaranteeing financing for companies that buy its AI chips.
Editorial reading aid based only on information contained in this story and its identified source.
At around 3:10 pm (Brasília time), the chip giant's shares rose 2.7% in New York.
One factor that has depressed Nvidia shares in recent days has been lingering fears about the sustainability of debt to finance expansion into AI. Hyperscalers like Alphabet, Amazon, Meta and Microsoft – which provide the massive cloud computing and data infrastructure behind AI – have taken on massive debt to finance their expansion.
As a result, the cost of insuring its debt against default via credit default swaps, or CDS, has risen in recent months, rattling bond watchers on Wall Street.
The worry is that if the AI boom doesn't deliver as much as expected, bondholders will be left with a loss.
Nvidia has not been spared these concerns because it is guaranteeing financing for companies that buy its AI chips. Reports that emerged last month show that the company was negotiating up to $250 billion in funding for OpenAI. Nvidia's own CDS have risen to their highest level this year in recent weeks.
News on Monday that could have provided clarity only muddied the waters. Nvidia announced that it was partnering with financial giants such as Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to establish AI infrastructure financing platforms to mobilize more than $500 billion. This raised the question of whether so-called “circular finance” would run out of control.
Nvidia CEO Jensen Huang sought to dispel these concerns on Tuesday by directly addressing circular finance. In a social media post on X, Huang said Nvidia can provide "a residual value support mechanism for up to 25% of an opportunity, carefully evaluated on a case-by-case basis."
This suggests that Nvidia's financing exposure, left open in the initial $500 billion statement, may be more limited, which eases bondholder fears and supports the stock. Source: Dow Jones Newswires.
*Content translated with the help of Artificial Intelligence, reviewed and edited by the Broadcast editorial team, Grupo Estado's real-time news system
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