The question is why a company like Nvidia, which currently has a cash position in excess of $68,000 M, is borrowing $25,000 M from the market.
Reported by Consejeros Editorial Team
Nvidia has issued debt worth $25,000 M, its first issuance since 2021. Nvidia thus joins the ranks of major technology firms issuing debt. Demand for the issue was very high, at $85,000 M, exceeding the supply by 3.6 times, and it was placed at IRRs of between 4.25% and 5.50% for maturities ranging from 3 to 30 years.
The question is why a company like Nvidia, which currently has a cash position of over $68,000 M, is borrowing $25,000 M from the market. According to experts at Bankinter, “the issue is not a matter of financial necessity but of optimising funding sources and maintaining financial strength in case it is needed in the future”. Divacons, for its part, refines the analysis and believes the response could be positive – “to finance share buybacks” – or negative – “to finance risks squared”.
In the negative scenario, it appears that Nvidia has tied up most of its free cash flow in financial investments and various support mechanisms for its own customers. Essentially, Nvidia has been financing demand for its own GPUs by lending its balance sheet to weaker players, namely OpenAI. “This is nothing new, but rather another warning that the circular economy is taking increasingly strange turns. For now, the market seems unconcerned, as Nvidia has issued seven tranches of debt with different maturities at minimal spreads”, explain Divacons. Indeed, the narrow spread over sovereign bonds, between 25 bp and 65 bp, demonstrates confidence in the company.
