Chipmaking giant Nvidia Corp. is looking to sell at least $20 billion of bonds on Monday, joining a wave of companies that are borrowing as they pay for investments in the artificial intelligence boom.
The size of the offering could still be boosted, according to people with knowledge of the matter. Nvidia is selling notes in seven parts with maturities ranging from two to 30 years, according to a separate person with knowledge of the matter.
The yield on the longest portion is initially being discussed at around 0.9 percentage point more than Treasuries, the person said, asking not to be identified because they’re not authorized to speak publicly. Proceeds from the sale will refinance outstanding debt, among other uses, the person said.
The bonds will be the first debt Nvidia has sold in five years. The sale is expected to be at least four times bigger than its two previous offerings, in 2020 and 2021.
Companies like Alphabet Inc. and Amazon.com Inc. have been flooding the debt markets with hundreds of billions of dollars of bond sales as they build data centers and other infrastructure needed for AI’s rapid expansion. Investors have so far readily absorbed the supply.
Nvidia is often a supplier for these projects, becoming a cornerstone for the AI ecosystem and also the biggest company in the world by market value in the process. It is spending heavily to support an ecosystem of companies that will help build demand for artificial intelligence. Last year, it decided to take a $5 billion stake in chip maker Intel Corp., and invest up to $10 billion in model maker Anthropic PBC. The company agreed to contribute $30 billion to a massive funding round for OpenAI, the latter said in February. It’s also boosting payouts to shareholders.
Like many big tech companies, Nvidia is generating heavy profit and cash flow from the artificial intelligence boom. The company is expected to generate more than $200 billion in free cash flow in the fiscal year ending Jan. 31, according to the average of analyst estimates compiled by Bloomberg.
A relatively cheap, long-dated debt sale could help lower Nvidia’s average cost of capital and enhance the funding of strategic AI partnerships, including with OpenAI, without weakening its AA credit profile, Bloomberg Intelligence analyst Robert Schiffman wrote in a note to clients.
Representatives for JPMorgan Chase & Co. and Morgan Stanley, among the banks running the offering, declined to comment. Goldman Sachs Group Inc., which is also managing the bond sale, didn’t respond to requests for comment. A Nvidia spokesperson referred requests for comment to the company’s filing on the offering.