Nvidia plans at least $20 billion bond sale, first in five years

Nvidia is set to issue corporate bonds valued at a minimum of $20 billion, marking its first foray into the bond market in approximately five years. This move comes as the artificial intelligence sector experiences escalating competition, prompting major tech companies to secure substantial funding.

The offering, which is Nvidia's first since 2021, will feature seven tranches with maturities ranging from two to 30 years. Initial reports suggest that strong investor demand could push the issuance size to $25 billion. The yield on the 10-year notes is expected to be set at 0.5 percentage points above U.S. Treasury yields, a figure lower than initially discussed, reflecting the robust demand.

Nvidia plans to use the proceeds for general corporate purposes, including the refinancing of existing debt. This issuance will significantly increase the company's total debt, potentially exceeding $30 billion from its current $8.5 billion. The company has been a major investor in the AI industry, allocating over $90 billion to companies like OpenAI, Anthropic, and Corning, and also provides financial guarantees to some clients.

However, concerns are emerging within the financial community regarding the increasing interconnectedness of AI companies. Tom Murphy, global head of investment-grade bonds at Columbia Threadneedle Investments, noted that "the market is starting to worry about circular finance." He cautioned that if one entity within the ecosystem faces difficulties, it could potentially impact the entire sector.

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The market is starting to worry about circular finance. If one entity within the ecosystem faces difficulties, it could potentially impact the entire sector.