00:00NVIDIA CEO Jensen Huang announced that a coalition of major investment firms,
00:04including BlackRock and Goldman Sachs, are lining up more than $500 billion to help fund the AI
00:10build-out. Credit default swaps fell in response, signaling recent investor worries that NVIDIA
00:16was inflating an AI asset bubble with circular financing easing. Bloomberg senior editor James
00:22Crombie joins us for more. James, good to see you. So we heard this announcement. There wasn't
00:27exactly a plan of, like, how much of this $500 billion is going to actually take the form of
00:32debt. We can assume it will be quite a lot. What do you make of the market reaction, though? Are
00:37investors basically saying they're OK with all of this debt that's coming? Well, it's a huge headline
00:43number, and we've never seen anything like it in credit. So, you know, a real head-turner. On the
00:49other hand, it shouldn't be that surprising, given that we know that, you know, $5 to $7 trillion
00:53needs to be spent over the next five years to build the AI infrastructure. NVIDIA is obviously
00:58at the forefront of that. So, you know, not surprising to see them come. We've become used
01:03to seeing $25 billion deals drive-by in credit over the last few months. So as much as the borrowers
01:10that need a lot of cash can get ahead of this, can telegraph their plans, and also be a bit
01:15creative,
01:15I think that's a good sign.
01:17What do you make of circular financing and the concerns? Because, like, we saw the NVIDIA
01:21CDS come down a little bit, but it's hard to imagine that this isn't adding to the larger
01:28circle of, you know, all of these deals getting done, especially if NVIDIA is going to be involved
01:32in so many.
01:33I mean, it's hard to see exactly how these deals would work, and it looks somewhat like
01:36vendor financing, which happens, you know, in other industries. The big unknown is how
01:40much are the GPUs, the chips actually worth over time, and, you know, can they be replaced
01:45by cheaper versions? Will they go obsolete? And who ends up taking the loss? So NVIDIA is actually
01:50offering a guarantee of sorts to try and assuage some of those concerns. But yeah, there's
01:56a huge amount of uncertainty around, you know, the pension funds, the insurance firms, and
02:00also the private credit lenders that will take a lot of this debt down.
02:03Before we let you go, let's look ahead. Just tell us what do you think credit investors
02:07need to watch out for when it comes to more AI-related credit news that we're going to see
02:12this year?
02:13SpaceX was the playbook. We're going to see Anthropic IPO. We're going to probably see OpenAI
02:18come to market and go public. Very soon after that, they will issue a lot of debt like
02:22SpaceX did. If you look at the SpaceX deal, how it performed, it's down 10 points on some
02:26of the tranches. So clearly, you know, long term buy and hold investors, which is what
02:30these firms need, they're not happy with the way these things are run. So they'll have
02:34to become cheaper to sell them. There'll be repricing of that debt.
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