Chipmaker Nvidia seeks to raise over $25B in first bond deal since 2021

Nvidia, a leading chipmaker, plans to sell $25 billion in investment-grade debt in the US, marking its first bond offering in five years. This significant move tests investor appetite for increased exposure to the burgeoning AI sector. The offering was upsized from an initial $20 billion due to robust demand, attracting over $85 billion in orders.

The issuance is structured as a seven-part bond offering with maturities ranging from two to 30 years. Favorable market conditions, particularly after the US-Iran deal, are enabling Nvidia to secure this debt at a relatively low cost, with the 10-year bond expected to yield 0.5 percentage points above US Treasuries.

This debt issuance comes as tech companies intensify their efforts to secure funding amidst a competitive AI landscape. Nvidia, as a primary supplier of chips for AI infrastructure, is uniquely positioned. The company intends to utilize the net proceeds for general corporate purposes, including the repayment and refinancing of outstanding notes.

Following this transaction, Nvidia's outstanding debt will more than triple, reaching approximately $30 billion from its current level of $8.5 billion. The company has a double-A credit rating, reflecting its strong financial standing. Goldman Sachs, JPMorgan, and Morgan Stanley are serving as active bookrunners for the deal.

While Nvidia has reaped substantial profits from AI spending, its shares have recently experienced a decline after peaking in May. The company is also a significant investor in AI firms, committing over $90 billion to developers and suppliers. However, the increasing use of financial guarantees and interdependence among AI companies have raised concerns about concentrated risks among bond investors.