Nvidia targets $25B+ in first bond deal since 2021
▼ Summary
– Nvidia is selling $25 billion in investment-grade bonds, its first bond sale in five years, after upsizing from $20 billion due to over $85 billion in orders.
– The offering includes maturities from two to 30 years, with the 10-year portion expected to yield 0.5 percentage points above US Treasuries.
– Strong demand and favorable market conditions after the US-Iran deal allowed Nvidia to lower borrowing costs from initial expectations.
– The bond sale comes amid an AI arms race and a surge in Wall Street debt and equity issuance, including SpaceX’s $75 billion IPO.
– Proceeds will be used for general corporate purposes, including refinancing, and will more than triple Nvidia’s debt outstanding to about $30 billion.
Nvidia is set to sell at least $25 billion in investment-grade bonds on Monday, marking the chipmaker’s first debt issuance in five years and offering a key gauge of investor enthusiasm for the AI sector. The company is launching a seven-part bond offering with maturities ranging from two to 30 years, according to a term sheet reviewed by the Financial Times.
The deal was initially sized at $20 billion but was increased after attracting more than $85 billion in orders by early afternoon in New York, according to people familiar with the matter. Strong demand also tightened pricing: the 10-year tranche is expected to yield just 0.5 percentage points above US Treasuries, down from an initial guidance of 0.75 percentage points.
Favorable market conditions, partly driven by the recent US-Iran agreement, are allowing Nvidia to borrow at 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,” she said. “And it doesn’t come to the market as often as the other tech names.”
The semiconductor giant, which has been the biggest beneficiary of Big Tech’s trillion-dollar spending spree on AI infrastructure, is tapping the bond market as tech companies scramble for capital in an intensifying AI arms race. The offering also comes amid a flood of new equity and debt on Wall Street, 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 in a statement.
Monday’s bond sale is at least three times larger than Nvidia’s previous debt issuance in 2021, during the coronavirus pandemic, when it raised roughly $5 billion. Once completed, the deal will more than triple Nvidia’s total outstanding debt to about $30 billion, up from the current $8.5 billion.
(Source: Ars Technica)
