By Karishma Vanjani
After five years of abstaining, a giant chip maker has returned to the bond market. That worries U.S. Treasury holders.
On Monday morning, the Securities and Exchange Commission website revealed a filing from Nvidia, labeled 424B5, that says the company wants to sell some debt. It will split it into seven parts, with maturities ranging from two years to 30 years, or 2056.
The last time Nvidia -- now valued at over $5 trillion -- tapped the debt market for fresh capital was in 2021. At that time, Nvidia had sold $5 billion worth of debt. This time, it is selling at least $20 billion, according to Bloomberg. The sheer size of Nvidia and its long absence from the debt market makes the filing a big deal, but that is hardly all.
The offering is coming at a time when the market has absorbed billions of debt issued by other chip makers and the U.S. government is projected to borrow roughly $2 trillion from the market this year. That sparks fears of a capital squeeze, whereby sheer supply overwhelms available buyer cash.
"Structural pressures from the AI buildout are real," wrote Lotfi Karoui, Multi-Asset Credit Strategist at PIMCO, earlier this month in his note. But these "are growing slowly, not driving the yield moves investors are watching right now."
About 74% of the rise in yields since the war can be attributed to changing interest-rate expectations, Karoui writes. Put simply, more artificial-intelligence supply is a problem for the market, but it's a change that is expected to play out over a multi-year period.
Corporate bonds and Treasuries are also different animals. A fundamental driver for Treasury demand comes from the need for collateral. Nvidia may be Wall Street's favorite company -- what with the stock up 1,039% over the past five years -- but it's no match for Uncle Sam when it comes to serving as the backbone of the financial system.
Treasuries are superior collateral. A bank pledging $100 million worth of U.S. Treasuries that expire between five to 10 years will fetch $97 million through the Federal Reserve's discount window program, whereas corporate bonds of the same duration, even from of a strong issuer such as AA-rated Nvidia, will get only 94% of its value.
The Fed's overnight and standing repurchase, or "repo," facilities are other places where Treasuries get swapped for cash by institutions at a very low cost.
Add to that, if a company like Apple faces distress, it's a tragedy for investors. For U.S. Treasuries, given their relevance, the government will always act as a backstop to prevent a costly selloff.
In a time of distress, like a recession, "there's a pecking order to who gets in the lifeboat first," Ed Al-Hussainy, portfolio manager at Columbia Threadneedle Investments, told Barron's late last year. "And treasuries are at the front of that line because of their specialness, because of their importance to the financial system."
The deep and liquid market for Treasuries also means investors are likely find a buyer or seller for their securities, a factor that adds a touch of uniqueness to U.S. debt.
Where the rivalry starts is the price. When the market sees attractive yields on bonds issued by stable companies, it raises the question of what is the right mix of corporate bonds versus Treasuries in portfolios. And it's that marginal shift from price-sensitive buyers that will ultimately push up the yield on 10- and 30-year Treasuries.
Hyperscalers -- or large-scale data-center operators -- have shown a penchant for longer-dated debt. Thirty percent of all 30-year issuance from blue-chip companies this year has come from hyperscalers versus 13% of year-to-date 10-year supply, Karoui writes.
That challenge from the corporate bond market is only going to get worse as more companies borrow to build more data centers. At some point, more AI supply will contribute to higher yields. But even then, U.S. Treasuries will have fundamental drivers for demand, and the AI revolution will be just one piece of the puzzle.
For now, demand for corporate bonds and Treasuries can co-exist.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 15, 2026 17:29 ET (21:29 GMT)
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