Nebius's $3.5bn bridge loan shows the cost of scarce neocloud funding
Jensen Huang says neocloud demand is "off the charts" but capital is scarce. Nebius's new loan lasts one year instead of four and costs 0.25 to 1.00 percentage point more than its July borrowing.
Jensen Huang says demand for neoclouds is "off the charts" and the money to build for it is not. He told CNBC on the sidelines of GTC Berlin. "What is missing in the middle is the working capital to fuel that growth."
Neoclouds rent out GPU computing capacity. The filings show what that capital costs.
Citibank will lend Nebius $3.5 billion for a year at 2.75 points over Term SOFR, the benchmark short term dollar rate. In July, against a contract with an investment grade customer, Nebius borrowed for four years at 2.50.
Scarcity shows up mainly in tenor, the length of the loan, rather than margin, the rate over the benchmark. The July loan had a contract behind it.
The bridge costs 0.25 point more than the July loan on day one and 1.00 point more at the cap.
On $3.5 billion, that is $8.75 million a year extra at the start and $35 million a year at the cap.
The step ups themselves add only about $13 million over the life of the loan. That is the cost of waiting a year.
Comparing the two loans
The July loan is the benchmark. A Nebius 6-K filing shows subsidiaries borrowed about $775 million from MUFG Bank. The rate is Term SOFR plus 2.50%, and the loan matures on 31 October 2030.
Nebius's second quarter letter says the loan is backed by deployed GPU infrastructure and contracted cash flows from an investment grade customer. A long contract made a long loan cheap.
The October loan has a different shape. Under the 6-K filed today, Citibank agreed to lend $3.5 billion to the parent and its US and Dutch subsidiaries. It is secured on substantially all of their assets.
The margin starts at 2.75% and rises by 0.25 point for each 90 days after 17 October, to a cap of 3.50%.
The loan matures on 16 October 2027, and Nebius may repay it early without premium or penalty.
The press release gives the 364 days and the cap but not the asset pledge or the step dates. Counting 90 day periods from 17 October, the first three steps follow 15 January, 15 April and 14 July 2027. The 6-K adds that the margin is "subject to other adjustments."
Nebius presents the loan as a way to choose when to raise longer term funding. Chief operating officer Ophir Nave says it shows the company can "choose when and how we raise capital to support our growth." The release says the loan gives flexibility over the timing of longer term financing.
How far the bridge funding goes
The proceeds go to data center development and GPU purchases. Nebius held $8.0 billion of cash at 30 June and expects more than $9 billion of customer prepayments in 2026.
At the recent pace of spending, the loan would be used quickly. Nebius spent about $5.7 billion on capital equipment in the second quarter, or roughly $440 million a week.
On gross spending, $3.5 billion covers about eight weeks. Customer prepayments cover part of that spending.
The Q2 letter says 70% of deals include prepayments covering 50% to 60% of the capex. So the bridge lasts longer than eight weeks, but it still postpones the long financing and does not replace it.
The company says asset backed debt against more than $40 billion of investment grade contracts remains available.
Long contracts earn less than short ones. Nebius's second quarter letter puts its four landmark long deals at a yield of $20 to $25 million per megawatt.
New auctions and short term deals are different. The letter sees "a price opportunity in the $40-50 million per MW range" and says Nebius signed the first one that week.
That target is about twice the long deal yield. A neocloud that can reprice capacity at that rate has a reason to borrow short now and finance long later.
NVIDIA and CoreWeave show other funding routes
NVIDIA commits money to other neoclouds. Its 10-Q for the quarter to 26 July lists $36 billion of commitments to buy cloud services from AI clouds, typically over six years.
The filing says those clouds "can unilaterally stop providing" the capacity and sell it to third parties "at more advantageous rates." The commitments shrink as capacity is used by outside customers or by NVIDIA's own research. NVIDIA may also share in the revenue the clouds earn from those customers, if certain criteria are met.
The same filing lists $3.5 billion of maximum gross exposure on guarantees of AI cloud partners' leases. Partners hold $712 million in escrow against it. The counterparties in the 10-Q are unnamed, so none of it can be placed at Nebius.
CoreWeave shows the other end of the range. Its 10-Q for the quarter to 30 June lists $35.6 billion of debt principal. Of that, $4.4 billion is due in the rest of 2026 and $6.2 billion in 2027.
Against it, CoreWeave held $5.5 billion of cash and securities, plus $10.0 billion of undrawn facilities. Its short term financing from equipment makers carries a weighted 9%.
In September CoreWeave sold $4.2 billion of 2.875% convertible notes due 2033, unsecured. Convertible notes can be swapped for shares.
CoreWeave's own 10-Q also shows NVIDIA paid $2.0 billion in January for about 23 million shares at $87.20. The debt is large, but CoreWeave has undrawn bank lines and a market for long, unsecured paper.
The refinancing deadline
Huang sells the chips, so the scarcity talk has a motive. NVIDIA's filing shows the money behind it: $36 billion of purchase commitments and $3.5 billion of guarantees on partners' leases.
It also lists memorandums of understanding with capital providers to mobilise more than $500 billion, which "may not lead to definitive agreements." NVIDIA's financial support shows how much it is willing to commit to relieving the shortage.
"That's going to get solved," Huang said. The July loan was raised against one investment grade contract, and Nebius says more than $40 billion of such contracts remain.
The bridge is prepayable at any time and its first step is a quarter point, so Nebius has no reason to hurry. Its real deadline is 16 October 2027. By then the bridge, about eight weeks of second quarter spending, has to be replaced by asset backed debt against those contracts.