The NVIDIA Bank: Jensen's $500B Wall Street Deal and GPUs as an Asset Class

**Ejaaz** (0:00)
Earlier this week, the most powerful people in finance stood around a table next to Jensen Huang and announced they had raised $500 billion to buy NVIDIA GPUs. Now, if you'll listen to this and you're thinking, this is just an AI bubble circular economy type thing, you might not actually be wrong. Larry Fink, the head of BlackRock, actually likened this deal to mortgage-backed debt securities of the early 2000s. And if that sounds familiar...

**Josh** (0:24)
To which he created.

**Ejaaz** (0:26)
Yes, to which he created. And if you're likening that to a PTSD flashback, that's because that's exactly what happened in the 2008 financial crisis itself. But if you look at the news in general, if you look at the way that this deal is structured, it might actually hint at something completely different. In fact, the opposite. GPU prices for renting has gone sky high, it's up 40% on the year, and there's not enough GPUs to back a lot of the deals that Microsoft, Google, Anthropic, and OpenAI are signing with NVIDIA. So the question that we're going to unpack on the show is, is this very much a bubble back deal, or is this something completely different that we're missing?

**Josh** (1:05)
A new paradigm of investing, a new paradigm of financial manufacturing and construction. This is a new investable asset class. Yeah, this is an entirely new thing. GPUs, who would have thought? Michael Burry, the guy who was responsible for the big short, he was like, no, the price of these things are going down only. Turns out he could not have been more wrong. And now Jensen has assembled Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR.

**Ejaaz** (1:28)
It's the avengers of finance. It's the avengers of finance.

**Josh** (1:32)
It's like Apollo alone has a trillion dollars of assets managed. Blackstone has over 1.3 trillion, Brookfield is over a trillion, and combined that's 3.4 trillion. BlackRock is bigger than all three of those combined. They're all doing this together. And together they've signed this thing called a Memorandum of Understanding. Now I had to actually look up what this means because I had no idea. A Memorandum of Understanding, or an MOU, is a formal, usually non-binding document signed by two or more groups. It shows that the groups share a common goal and plan to work together. So this is not a contractual obligation. We have to start with that. This is not a guarantee that $500 billion is going to flow into this new economy. But it is an intention that all of these people are going to be aligned to work together towards funding this next build out of AI. And what I found most interesting is that this was actually orchestrated entirely by Jensen.
Jensen reached out to all of these banks himself personally, and he said, hey, I'd like to work together on this thing. And not a single bank that he reached out to said no. So here we are now with a moment on CNBC in which they're all sitting around a table talking about how they are committing $500 billion to this new asset class. And this is unbelievable. This feels like, for better or worse, a brand new paradigm for the AI era in which now the collective force of the United States banking system is starting to get behind this. And I should say, this is not for AI as a whole. This is purely for NVIDIA as a company.

**Ejaaz** (2:57)
Yeah. And I want to take a moment to actually explain what's happening here because I think there's a lot of confusion. There's a lot of headlines that people are getting worried over. NVIDIA stock tanked 4% on the news. But I think that's a little too early to charge. So firstly, what does this structure look like? Well, it's what you're seeing on the screen right now, which is essentially there's a problem in AI right now, which is all these hyperscalers, all these AI labs, Anthropic, OpenAI, Google, Meta, you name it, have spent a lot of money to buy GPUs. The reason why they're doing this is to train and inference brand new AI models which they have a lot of paying customers for. But the issue they're facing is the money they've invested, which is now to the tune of $2.6 trillion converted over the next couple of years, I believe, is not enough for them. So much so that they're going into negative cash flow. So what happens when you've spent all the money that you have in your company, in your balance sheet? You need to go to Wall Street. That's exactly what NVIDIA, specifically Jensen, has broken. He's gone to Wall Street and he said, listen, we need more money to build more GPUs to sell to these different customers so that they can produce their products and services, their new models. And Wall Street has gone back and said, I have an issue with this, Jensen, which is GPUs aren't a versatile asset. Like they can only be used for one thing specifically, which is either trading a model or inferencing a model, and it's only customer specific. And Jensen responded to them and said, that's not true at all. GPUs, specifically NVIDIA GPUs, are the most versatile asset out there. You can use it for anything. You can use it for training, you can use it for inference, and you can use it for any model, whether it's Claw, whether it's GPT, whether it's Gemini, whatever. You can use it for it, which means that it's a versatile customer base, it earns a lot of money, and then Wall Street shot back at him and said, well, hang on a second, these GPUs die after a couple of years. And Jensen goes, that's not actually true. In fact, we have 10-year-old GPUs that are being re-signed for another 10 years right now, today at a higher price than they sold earlier on. So basically, what he's pitched them is this is a new asset class and it can earn a ton of money. And so Wall Street looked at this, some of the biggest financial powerhouses in the world, and thought, you know what, he might be right. This is an asset class that can be likened to property or railroads back in the day. And that's why Larry Fink is comparing it to the 2008 mortgage-backed securities. Now, if you're wondering, okay, well, this is like a financial crisis type thing, you might be right, except there was like a few different things going on there, which we'll unpack later in the episode.