(Bloomberg) — Bond traders dialed back measures of credit risk associated with Nvidia Corp. on Tuesday after the company said it would limit its exposure in a $500 billion plan to finance the type of artificial-intelligence investments that are driving demand for its computer chips.

Most Read from Bloomberg

• Five Takeaways From Zuckerberg’s 6,500-Word Manifesto on AI

• China Unleashes $28 Trillion Capital Markets to Challenge US in AI

• Nvidia Taps Wall Street for $500 Billion Funding Commitment

• Trump Makes Sweeping New Demands on Iran as Deal Hopes Dim

• Apple’s Glass-Centric 20th-Anniversary iPhone Remains on Track for 2027

The yields on Nvidia’s 5.625% bonds that mature in 2056 slipped to 113 basis points above comparable Treasuries, a decline of 2 basis points. At the same time, the price of five-year credit default swaps narrowed as much as 5 basis points to 72.11 basis points a year, according to ICE Data Services.

The movements show an easing in Wall Street’s worries about the financing plan, which underscored how dependent the chipmaker has been on the debt-fueled investment spending of the tech companies that are racing to dominate the AI business.

Reports on the funding plan, as well as the initial announcement late Monday, offered few details on its timing and structure, leaving investors scrambling to understand its potential impact on Nvidia, according to traders and money managers.

“Nobody knew what the $500 billion potential financing meant,” said Sal Naro, chief investment officer of Coherence Credit Strategies. “Today you have an idea that they’re getting everybody involved and that their exposure isn’t as serious as investors originally feared.”

In a post on X, Nvidia Chief Executive Officer Jensen Huang said the company’s support would extend to “up to 25% of an opportunity, assessed carefully on a project-by-project basis.”

He said “that support is limited, residual-value based and designed to complement — not replace — independent underwriting.”

That clarification eliminated some of the uncertainty associated with the plan, which also involves Apollo Global Management Inc., Blackstone Inc., BlackRock Inc., Brookfield Asset Management, Goldman Sachs Group Inc. and KKR & Co.

The chipmaker is among tech giants tapping the US investment-grade market at an unprecedented pace to finance AI initiatives, which has fanned periodic fears about the outlook for the company’s sales if the big tech companies eventually scale back the scope of their spending.

Nvidia has already signed large chip-and-investment deals with several AI companies, raising concerns that such circular agreements are inflating demand for its chips and corporate valuations across the industry.

https://finance.yahoo.com/technology/ai/articles/nvidia-credit-risk-eases-ceo-160937806.html