The Key to Jensen Huang's 500 Billion Gamble: Can Chips Disrupt the Inevitable Depreciation of Tech Products?

Nvidia is joining forces with Wall Street to bet on a disruptive proposition: can AI chips break the long-standing financial rule that tech products depreciate rapidly?

Wallstreetcn reported that this week Nvidia announced a partnership with Wall Street giants, including Apollo, Blackstone, BlackRock’s GIP, Brookfield, Goldman Sachs, and KKR, forming a consortium to raise up to $500 billion for AI infrastructure projects. The funds will be used for AI chip procurement, power generation, and data center construction, with financial giants providing semiconductor leasing financing for technology companies.

On August 13, according to the Financial Times, financial executives involved in the deal revealed that the core logic of the plan is: the ongoing AI frenzy will keep chip prices at elevated levels for much longer than most analysts previously predicted. Nvidia CEO Jensen Huang stated that this deal will create a new asset class with chips as the underlying asset, opening the doors to the $22 trillion private capital industry.

However, this grand vision faces fundamental risks: it remains unknown whether financial institutions can accurately judge the longevity of demand and long-term value for Nvidia’s chips. Unlike leasing cars or commercial planes, chip technology evolves rapidly, demand is volatile, and their long-term value is highly uncertain. This $500 billion bet is, in essence, a historic wager on whether demand for AI computing power will persist, and whether chips can become reliable financial assets.

Deal Structure: Private Capital Enters, Nvidia Transfers Off-Balance Sheet Pressure

The core structure of the deal is to securitize chip leasing receivables and sell them to debt buyers like insurance companies.

According to the Financial Times, private equity firms like Apollo, KKR, and Brookfield plan to package GPU lease contracts into securities, leveraging their managed insurance asset pools to raise large-scale funds. Some institutions are considering establishing dedicated financing vehicles and, referring to the commonly used collateralized loan obligation (CLO) structure in private equity buyouts, tranche the chip assets for investors with varying risk preferences.

“You can finance GPUs in tranches, just like a CLO,” said an executive involved in the transaction, but some are cautious, noting, “Each institution will have different financing approaches.”

For Nvidia, this arrangement also carries significant financial implications. Bank of America research analyst Vivek Arya pointed out this week that Wall Street’s financial involvement means Nvidia can gradually exit its “vendor financing” model—where Nvidia previously directly guaranteed client financing and facilitated their access to capital markets.

“The burden is borne by the consortium, not Nvidia’s balance sheet,” Arya said, adding that this is clearly positive for Nvidia.

Core Debate: Can Chips Break Technology Depreciation Rule?

The greatest uncertainty of this deal lies in whether the long-term value of chip assets is sufficient to support financialization.

Traditional finance has always been cautious toward technology assets. Currently, for chip-lease-backed debt, most lenders require full repayment within three to five years, based on the assumption that: the underlying assets will be worth close to zero after that period. Unlike cars or commercial aircraft leases, which have a mature secondary market in case of client default, obsolete chips have virtually no reliable buyers.

Silicon Valley-based Creative Strategies analyst Ben Bajarin bluntly stated the risk:

“The whole scheme is predicated on continued investment. There is a risk of overbuilding, demand may slow, or models may improve enough that less computing power is required.”

Additionally, chip buyers or lessees must build data centers in parallel, meaning expected revenue streams will significantly lag spending plans, further intensifying cash flow pressures.

Nvidia’s Reply: Old Chips Are Still Creating Value

Facing skepticism, Jensen Huang backed his logic with real data.

Wallstreetcn reported that on Monday, Huang posted on social platform X, stating that rental prices for Nvidia's recent chips have risen, and even the six-year-old A100 chip is still in use—outliving its original expected life. He has also repeatedly emphasized that even older H100 chips are retaining value far better than the market expected, driven by explosive demand for computing power.

Nvidia’s strategy doesn’t stop there. The company continually updates its Cuda software platform to proactively extend chip lifespans. Cuda is Nvidia’s core for maintaining its AI processing dominance, enabling customers to use GPUs originally designed for graphics to accelerate AI applications.

Bajarin believes robust demand across chip categories is likely to support Nvidia’s plan in the medium term, while long-term success hinges on continued reduction of total cost of ownership for Nvidia products.

In terms of risk-sharing, Nvidia has also made a substantive commitment: guaranteeing at least 25% residual value for chips during the lease period, with the $5.3 trillion market cap chip giant absorbing initial losses.

According to the Financial Times, an executive involved in the $500 billion transaction said, “GPUs have intrinsic value. Nvidia has a ten-year track record for GPU lease pricing,” and characterized Nvidia’s guarantee as the “first-loss protection” for future financing, meaning the company absorbs early value losses beyond expectations.

Despite the risks, Wall Street’s enthusiasm has been ignited.

Blackstone’s Jon Gray and BlackRock’s Larry Fink have both stated publicly that their firms are looking to deploy capital to capture the immense demand for new data centers—which will be used to train and run the latest AI models.

The report noted that another executive working with Nvidia expects GPU leasing to drive pricing standardization and generate economies of scale for AI firms. He said, as “people figure things out,” even public debt market investors will eventually enter the space, enhancing the liquidity and tradability of this asset class.

Analysts believe the key to this process is whether the market can form a consensus on the long-term value of chips. If Nvidia’s 25% residual value guarantee withstands market tests, chip lease securitization may become another mainstream asset class born from the AI investment wave, following data center infrastructure debt. But if demand for AI cools and computing power growth slows, this $500 billion wager led by Jensen Huang will face a stern stress test.