The cost of protecting Nvidia Corp.’s debt against default surged by the most on record Monday, after reports of the chipmaker being in conversations on more than $750 billion of artificial intelligence infrastructure deals stoked fears about the company’s obligations.
A partnership with SK Group unveiled late Friday means the companies will be doing more than $500 billion in business with each other, Nvidia said. Nvidia is also in talks to backstop as much as $250 billion to help OpenAI lease computing power from a US data center project in what would be among the chipmaker’s biggest financing deals with a customer.
Nvidia is also having discussions to finance $350 billion of OpenAI’s purchases of its chips for the US project, according to a person familiar with the matter.
Such borrowing would likely require investment-grade ratings, which are difficult for the likes of OpenAI and Anthropic PBC to currently support given they are rapidly burning cash to grow their businesses. Backing from big firms can help debt that funds AI infrastructure spending win high-grade ratings.
Meanwhile, the price of protecting Nvidia's debt against default for five years rose as much as 0.14 percentage point to 0.82 percentage point a year, according to ICE Data Services. That’s the biggest intraday rise since the swaps started to actively trade in November.
“The amount of capex needed to build out the AI infrastructure is massive, and debt markets are being inundated with supply,” said Sal Naro, chief investment officer of Coherence Credit Strategies. “There’s a fear of financial alchemy driven by opaqueness, off-balance-sheet transactions and intercompany relationships, which could result in credit rating downgrades.
The move echoes Oracle’s downgrade to BBB- earlier in July, underscoring how the enormous financing demands of the AI buildout are beginning to strain even the industry’s largest companies’ credit profiles.
Jiayi ZHANG
