Six Wall Street giants back Nvidia as company answers ‘circular financing’ claims

Six major Wall Street investment firms – Apollo Global Management, Blackstone, BlackRock, and Brookfield Asset Management – have joined forces with Nvidia to create $500 billion in financing for artificial intelligence infrastructure. This partnership involves establishing independent financing platforms to funnel hundreds of billions into the development of AI infrastructure over time.

This is a significant development for both Nvidia and the AI industry, demonstrating how the mounting demand for AI computing power is attracting institutional investors as governments, businesses, and startups strive to build data centers to support AI workloads.

The initiative aims to expand access to Nvidia's AI infrastructure for frontier AI developers, enterprises, governments, and cloud providers, while also generating long-duration, usage-linked investment opportunities for large asset managers and private capital firms. This approach combats the common criticism that funding raised by leading AI companies, such as Nvidia, OpenAI, Oracle, and Anthropic, is subject to circular financing – a business arrangement where a company invests in or extends credit to a partner, who then uses those funds to purchase products or services from the original investor, leading to a self-reinforcing financial loop.

In Nvidia's case, circular financing refers to a loop where the company invests in AI startups and data center projects, and those entities subsequently use those funds to acquire Nvidia's high-end GPUs. Nvidia addressed these circular financing accusations in a blog post titled "The Important Questions: Is this circular financing?"

The company emphasized that their initiative is designed to bring independent, long-term institutional capital into the AI infrastructure market, with capital providers undertaking independent underwriting, including the assessment of customer demand, utilization, cash flow, and residual value. Nvidia provides the platform, while the investors make their financing decisions independently. This marks the beginning of an open capital market for AI infrastructure.

Nvidia may offer a residual-value support mechanism for up to 25% of an opportunity, subject to careful assessment on a project-by-project basis. This support is limited, residual-value based, and intended to complement rather than replace independent underwriting. This approach is considerably less than other compute-financing arrangements.

Nvidia can provide this support because its compute is unique – it is fungible, universally adopted, software-upgradable, and redeployable across a vast ecosystem of customers. The blog post concludes by highlighting that these partnerships will make AI factories more accessible to companies, industries, and nations building the future, thereby driving the next industrial revolution powered by AI.