Nvidia Corp. is expected to lease a data center being built with funds from a $3.8 billion junk-bond sale, adding to the borrowing frenzy around artificial-intelligence infrastructure.
An entity backed by asset manager Tract Capital will sell the debt to finance a portion of the construction of a 200-megawatt data center and substation in Storey County, Nevada, according to people with knowledge of the matter, who asked not to be named discussing a private transaction.
The size of the bond deal was increased by $150 million on Thursday afternoon, a sign of positive demand. Pricing discussions are for a yield of around 6%, the people added.
A representative for Tract declined to comment. Nvidia didn’t respond to requests for comment.
Data center developers have been tapping the high-yield bond market in recent months to finance the construction of new facilities. A pair of crypto miners — Cipher Mining Inc. and TeraWulf Inc. — did so with a backstop from Google, and Applied Digital Corp. raised money for facilities that would rely on junk-rated CoreWeave Inc. as the main tenant.
Nvidia’s initial lease is for about 16 years and the blue-chip company has an option to extend the tenancy for two 10-year periods, according to bond offering documents seen by Bloomberg News.
Borrowers from Oracle Corp. to Meta Platforms Inc. have raised billions in the investment-grade bond market to build out facilities to support the AI boom, but fewer deals have emerged from junk-rated companies.
Tract Capital, an alternative asset manager focused on digital infrastructure with about $6 billion of assets under management, recently launched what it calls its Fleet strategy to build new data centers for hyperscalers. Fleet I is its inaugural fund, which owns the borrower for this bond offering, SV RNO Property Owner 1.
Fleet I was expected to contribute about $620 million of equity to the project to help fund the construction, according to the documents. But the proceeds of the additional debt for the bond deal will be used to reduce the equity contribution, Bloomberg reported.
The deal is expected to price on Friday. JPMorgan Chase & Co. is leading the transaction, and Morgan Stanley is listed as a co-manager, according to the documents.
Representatives for JPMorgan and Morgan Stanley declined to comment.
Nvidia runs its own data centers and gets additional capacity by leasing space from cloud providers such as Amazon.com Inc.’s AWS and Microsoft Corp.’s Azure. It uses AI to design chips and computers, something it said is becoming increasingly complex and requires more computing power. Nvidia also develops AI models and software offerings, many of which are open source.
