Nvidia in a multi-billion project — and your pension is in real danger
Nvidia CEO Jensen Huang announced, alongside executives from six of the world's largest asset management firms, a massive financing mechanism for data centers. But behind the promises of AI infrastructure lies a complex credit structure that reaches pension funds — ours, here, in Israel | All the details
In episode 392 of the podcast "Money Engines" by Calcalist, featuring the chief economist and strategist at Meitav Dash (Agam Leaderim), Ori Greenfeld, one of the most intriguing announcements in the global capital market is discussed.
Nvidia CEO Jensen Huang sat down with the heads of six of the world's largest asset management firms — Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR — to present a financing mechanism totaling $500 billion for the construction of data centers.
The core idea behind the move is a change in the financing model. Instead of treating artificial intelligence chips merely as equipment recorded on the books and depreciated over time, the goal is to turn them into infrastructure that can be collateralized and used to finance assets.
Until now, data centers were built primarily through the free cash flow of cloud giants and through Nvidia's own funds. However, the free cash flow of cloud companies has begun to shrink in the face of construction commitments totaling hundreds of billions of dollars. At the same time, pressure has built up in smaller credit funds, which in some cases have even imposed barriers on withdrawals.
Against the backdrop of these pressures, external money enters the picture. The deal structure is based on a special purpose vehicle (SPV), where about 20% of the capital comes from the company itself, while the remainder of the amount is injected from credit funds.
However, the money managed by the credit funds does not privately belong to BlackRock or Apollo. It comes from institutional entities and pension funds, including Israeli pension funds that have invested in these funds in the past.
This structure shifts the focus of risk to the saving public. If revenues at the end of the chain are lower than expected, or if future competition harms the long-term commitment structure, those who may absorb a lower return are the saving public.
In the capital market, signs of pressure are already beginning to be identified. Nvidia's CDS prices, which reflect the insurance premium in the event of default, have risen from 0.4% to 0.8%. At the same time, Oracle's CDS prices have jumped to over 2%.
Alongside this, Morgan Stanley announced a massive financing project totaling $1.5 trillion for the technology sector, with not a single dollar of the amount coming from the company's own pocket.
