Nvidia's $500 Billion Financing Plan Is 20 Times What the Telecom Bubble Ran On
The last hardware buildout financed by the vendors themselves ended with up to 80% of the loans written off. This one runs on Wall Street's capital instead of the vendor's.
Overview
Nvidia (NASDAQ: NVDA) signed memorandums of understanding Monday with six of Wall Street's largest investment firms to establish independent financing platforms -- vehicles meant to mobilize more than $500 billion of third-party capital for artificial intelligence (AI) infrastructure. The six are Apollo Global Management, BlackRock, Blackstone, Brookfield Asset Management, Goldman Sachs, and KKR.
The idea is to let lenders treat computing hardware the way they treat buildings or toll roads (an asset that produces revenue and can therefore secure debt).
Details
Markets have run a version of this experiment before. In the late 1990s, telecom equipment makers lent their customers the money to buy their gear, and by the end of 2000, nine suppliers (including Lucent, Nortel, and Cisco) had extended about $25.6 billion, according to a McKinsey estimate.
Source
Originally published at www.fool.com.