Nvidia Corp. is poised to lease a data center in Nevada, a venture financed through a $3.8 billion junk-bond sale. This move underscores the growing trend of leveraging high-yield bonds to fund AI infrastructure projects.
Details of the Bond Sale
An entity supported by asset manager Tract Capital is responsible for the debt issuance, aimed at funding part of the construction of a 200-megawatt data center and substation in Storey County, Nevada. The bond deal’s size was increased by $150 million, reflecting strong demand, with pricing discussions targeting a yield of around 6%.
Market Trends and Implications
Data center developers are increasingly tapping into the high-yield bond market to finance new facilities. Notably, companies like Cipher Mining Inc. and TeraWulf Inc. have also utilized this financial strategy, backed by tech giants such as Google. Nvidia’s lease agreement is initially set for 16 years, with options to extend for two additional 10-year periods, according to bond offering documents.
- Tract Capital’s Fleet strategy focuses on building data centers for hyperscalers.
- Fleet I, the inaugural fund, is the borrower for this bond offering.
- The bond proceeds will reduce the equity contribution to the project.
Broader Financial Context
While companies like Oracle Corp. and Meta Platforms Inc. have raised substantial funds in the investment-grade bond market for AI-related infrastructure, fewer junk-rated companies have followed suit. Tract Capital, managing around $6 billion in assets, is spearheading this initiative through its Fleet strategy.
JPMorgan Chase & Co. is leading the transaction, with Morgan Stanley as a co-manager. Nvidia, which operates its own data centers and leases additional capacity from providers like AWS and Microsoft Azure, continues to advance its AI capabilities by designing complex chips and developing open-source AI models and software offerings.
