Bloomberg reported on June 15 that Nvidia issued $25 billion in investment-grade bonds, marking its first foray into the bond market since 2021.
Demand for the bonds significantly exceeded expectations. Initially, Nvidia aimed to raise about $20 billion, but orders surged to as much as $85 billion, prompting the company to increase the issuance to $25 billion. The total orders surpassed three times the amount issued.
Nvidia issued bonds across seven maturities ranging from 2 to 30 years. The funds raised will be used for refinancing existing debt and other purposes.
This issuance aligns with a trend among major tech companies like Alphabet and Amazon, which are also raising substantial funds in the bond market to invest in AI data centers and related infrastructure. The demand for semiconductors, power, and data center investments has surged alongside the expansion of AI services, increasing the funding needs of big tech firms.
Nvidia is broadening its role from an AI semiconductor supplier to an investor in the AI ecosystem. The company has invested $5 billion in Intel and plans to invest up to $10 billion in AI company Anthropic. Additionally, it is contributing $30 billion to the large-scale funding of OpenAI.
Despite generating significant cash flow from the AI boom, Nvidia appears to be leveraging low borrowing costs to expand its strategic investments. According to average analyst forecasts compiled by Bloomberg, Nvidia is expected to generate over $200 billion in free cash flow by the end of its fiscal year in January 2024.
Market conditions for bonds were favorable. With expectations of a peace agreement between the U.S. and Iran, the risk premium for investment-grade corporate bonds has decreased, and U.S. investment-grade corporate bond funds have seen inflows for 13 consecutive months.
Nvidia's bonds attracted investor interest due to their high credit rating and scarcity. The company holds a dominant position in the AI semiconductor market, securing substantial demand without the need for a separate investor presentation.
On the same day, a total of eight companies, including Nvidia, raised $36 billion in the U.S. investment-grade corporate bond market.
* This article has been translated by AI.
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