The borrowing frenzy for artificial intelligence infrastructure continues. A data center developer with deep ties to NVIDIA has re-entered the high-risk, high-yield junk bond market, announcing plans on Monday to raise $4.5 billion to fund its hyperscale computing project in Nevada.
According to terms disclosed to potential investors, the entity, which is backed by an asset management firm, is selling five-year notes with initial price guidance indicating a yield in the high 6% range. JPMorgan Chase is acting as the lead underwriter for the offering.
The proceeds will be used to construct a 200-megawatt data center and a supporting substation in Storey County, Nevada. The project's ability to secure such substantial financing hinges on a long-term lease agreement with NVIDIA. Previous bond issuance documents reveal that NVIDIA has committed to an initial lease term of approximately 16 years, with options for two additional 10-year extensions. This model of securing a blue-chip tenant significantly mitigates the project's cash flow risk, enabling the currently non-revenue generating project company to obtain financing.
This marks the second major bond issuance for this project. In February of this year, the same developer issued $3.8 billion in junk bonds, which attracted $14 billion in demand from investors. This follow-on financing comes at a time of explosive growth in AI computing demand, leading to severe shortages of data center space and power supply, prompting tech giants to secure future computing capacity through such arrangements.
It is noteworthy that this wave of infrastructure financing is expanding from the investment-grade market into the high-yield bond sector. Beyond NVIDIA, Alphabet has also sought $5.7 billion in financing through a similar structure for its own data center expansion. For investors, this presents an opportunity to participate in AI infrastructure investments backed by the credit of major technology companies, though they must remain cautious of systemic risks such as delays in power supply.
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