Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR are working with Nvidia to build a 500 billion dollar financing effort. The goal is to turn compute into an investable asset class.
Nvidia CEO Jensen Huang stated that chips are now revenue-generating assets that are productive, long-lived, fungible, and flexible. This message contrasts with his remarks last year when he claimed older Hopper chips would be impossible to give away once Blackwell shipped in volume.
BlackRock CEO Larry Fink compared the initiative to the origins of the mortgage-backed securities market in the 1970s. However, former hedge fund manager Mark Rubinstein warned that those past securities failed due to overproduction. Similar saturation risks now threaten the AI industry as data centers expand.
This initiative is currently built on memorandums of understanding rather than final deals. Broadcom established a similar 35 billion dollar package earlier this summer with Apollo and Blackstone, using about a million chips as collateral to fund compute.
Huang now claims the economic life of Nvidia chips stretches toward a decade, citing the 2020 A100 chip as an example. Short seller Michael Burry previously suggested a two to three year depreciation cycle for chips, while IBM CEO Arvind Krishna estimated five years.
Higher demand for inference drives price increases for older chips, according to AI industry analyst Brendan Burke. Neoclouds like CoreWeave rely heavily on Nvidia chips and funding. CME Group announced plans to introduce compute futures in October pending regulatory approval.
These financing arrangements help Nvidia lower financing costs for its chips and compete against alternatives like Google TPUs, Amazon Trainium, and cheaper CPUs. Nvidia also maintains extensive investments and cloud service agreements with neoclouds that buy its hardware.
