Nvidia is set to raise over $25 billion through its first bond sale in five years, according to a term sheet reviewed by the Financial Times. The company will issue a range of bonds with maturities from two years to 30 years. The offering was upsized from $20 billion after receiving more than $85 billion in orders by early afternoon in New York. The 10-year portion of the bond was expected to yield 0.5 percentage points above US Treasuries, down from 0.75 percentage points during initial discussions, according to one person familiar with the deal. Favorable market conditions following the US-Iran deal are allowing Nvidia to raise debt at a relatively low cost, said Lauren Wagandt, a portfolio manager at T Rowe Price. “It’s a very high-quality company at the end of the day,” said Wagandt. “And it doesn’t come to the market as often as the other tech names.”

The issuance by the semiconductor group, the biggest beneficiary of Big Tech’s trillion-dollar spending spree on AI infrastructure, comes as tech groups race to secure funding amid an intensifying AI arms race, but also as Wall Street faces a torrent of new equity and debt issuance, including SpaceX’s record $75 billion initial public offering. “We intend to use the net proceeds from this offering for general corporate purposes, including repayment and refinancing of outstanding notes,” Nvidia said. Monday’s offering is at least three times larger than Nvidia’s previous bond sale in 2021 during the coronavirus pandemic, when it raised about $5 billion. When completed, it will more than triple Nvidia’s debt outstanding to about $30 billion from the current level of $8.5 billion.

Nvidia’s position as the AI industry’s go-to supplier of the powerful chips needed to build large language models such as OpenAI’s GPT has proven extremely lucrative for the Silicon Valley company, with its free cash flow in the year to January leaping 59 percent to $96.6 billion. However, after its valuation peaked at about $5.7 trillion in May, its shares have fallen alongside the wider semiconductor market in recent weeks, with its market capitalization dropping below $5 trillion at the end of last week. While reaping huge profits from AI spending, Nvidia has also become a significant investor in AI companies, committing a total of more than $90 billion to developers, including OpenAI, Anthropic, and xAI, and suppliers, including Coherent, Marvell, Lumentum, and Corning.

Source: arstechnica