- Nvidia unveiled a $500 billion third-party capital commitment for AI infrastructure, partnering with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR.
- Wall Street reacted with mixed views, including Michael Burry calling it a 'stunt' and concerns about circular AI deals.
- Morgan Stanley analysts led by Joseph Moore expressed optimism, seeing large annuity potential and limited downside, and reiterated Nvidia as their top semiconductor pick.
- Morgan Stanley estimated that a neocloud ecosystem of similar size could generate $500 billion in annual revenue, potentially driving 60% upside to FY28 EBIT estimates if Nvidia captures a quarter of that.
Morgan Stanley analysts, led by Joseph Moore, have expressed optimism regarding Nvidia's recent announcement of a $500 billion funding initiative aimed at AI infrastructure. This funding, which involves partnerships with major financial players like Apollo and BlackRock, is seen as a transformative move in the tech landscape.34
The analysts noted, “Nvidia backstopping neo-cloud investment in exchange for revenue sharing is likely to further polarize the stock. We are definitively on the optimistic side, seeing a large annuity potential with limited downside,” indicating their belief in the long-term viability of this strategy.
They further emphasized that “the compute demand is there to support this - and that the demand would be underserved if not for this initiative.” By establishing minority stakes in various cloud service providers, Nvidia aims to create predictable revenue streams that enhance its earnings power while mitigating risks.
The brokerage's tech teams project that the four largest U.S. hyperscalers will add approximately 25 gigawatts of compute capacity by 2027, excluding Tensor Processing Units. They estimate that a neocloud ecosystem of this scale, monetizing at $20 million per megawatt, could yield $500 billion in annual revenue.56
If Nvidia captures just a quarter of this market as high-margin revenue, it could lead to a 60% upside to their FY28 EBIT estimates, or a 25% upside for FY29, without altering Nvidia's initial sales projections.
“The brokerage estimates the four biggest U.S. hyperscalers will add about 25 gigawatts of compute in 2027, and a similar-sized neocloud ecosystem monetizing at $20 million per megawatt could generate $500 billion in annual revenue. If Nvidia captures a quarter of that, it could drive 60% upside to FY28 EBIT estimates.”
