Does NVIDIA's $500B AI Push Open a New Opportunity for Financial ETFs?

Nvidia NVDA announced on Monday that it had entered into memorandums of understanding with Apollo Global Management APO, BlackRock BLK, Blackstone BX, Brookfield BAM, Goldman Sachs GS and KKR KKR to establish financing platforms aimed at supporting its customers, as quoted on CNBC.

The chipmaker is advancing its effort to turn AI computing into a new asset class for Wall Street, collaborating with major asset managers on a $500 billion financing push. The initiative seeks to make AI compute infrastructure akin to commercial real estate, toll roads and other assets that can be financed against.

As quoted on the abovementioned article, the NVIDIA initiative could unlock more than $500 billion in third-party capital for AI infrastructure, helping hyperscalers, frontier AI labs and enterprises expand data-center capacity and purchase NVIDIA hardware. By connecting its customers with institutional credit, insurance funds and private capital, NVDA is helping shift some of the funding burden away from their balance sheets.

Speaking with CNBC, Jensen Huang, NVIDIA’s founder and CEO, stated that AI computing is emerging as a new investable asset class, as quoted on the abovementioned article. Huang contended that NVDA’s widely adopted and transferable hardware enables lenders to underwrite AI computing as a durable, revenue-generating asset with a long useful life. The chipmaker’s efforts seek to turn AI computing capacity into a long-term, financeable asset. However, skeptics remain.

How Asset Managers Fit Into the AI Financing Push

The AI narrative is increasingly expanding beyond technology to the financing of the infrastructure behind it. NVIDIA’s latest financing push highlights the growing role of financial institutions in funding the infrastructure needed to support AI’s rapid expansion.

The ETFs mentioned below could offer investors exposure to companies positioned to benefit from the broader AI financing boom. Potential beneficiaries include lenders benefiting from growing credit demand, asset managers collecting fees on rising capital deployment, private-credit firms financing AI infrastructure and investment banks and capital-markets firms supporting the financing and structuring of these projects.

Huang believes the next phase of AI infrastructure financing will be driven by Wall Street rather than corporate balance sheets, with leading financial institutions playing a central role in funding the industry's expansion, as quoted on another CNBC article.

As per the previously mentioned CNBC article, alternative asset managers have been increasingly deploying capital into digital infrastructure, using institutional and insurance capital to finance these projects. Firms like Apollo and Blackstone have already helped finance companies like Anthropic through debt and equity arrangements.

Larry Fink, BlackRock’s CEO, along with executives at Wall Street firms like Blackstone’s President Jon Gray and Goldman Sachs’s CEO David Solomon, on Monday, stated that AI compute is emerging as a critical asset class that could drive the next phase of global economic expansion.

According to Blackstone’s Gray, as quoted on the previously mentioned CNBC article, AI compute could eventually be treated as a “financeable asset class,” with lenders financing computing infrastructure much as mortgage lenders finance homes.

Additionally, BlackRock’s Fink described the initiative as the beginning of a “next future for financial engineering,” drawing a comparison to the development of mortgage-backed securities in the 1970s. While some funds have already been raised, Fink said BlackRock plans to raise substantially more capital going forward.

However, it is important to note that the immediate benefit from NVIDIA’s announcement is likely to be concentrated among the financial firms directly involved in the initiative, rather than representing a broad-based tailwind for the entire financial sector. Broader financial companies could benefit if NVIDIA’s financing model gains traction and AI infrastructure investment continues to accelerate.

ETFs for a Direct Play on Alternative Asset Managers

VanEck Alternative Asset Manager ETF GPZ

VanEck Alternative Asset Manager ETF seeks to track the performance of MarketVector Alternative Asset Managers Index, which measures the performance of alterative asset managers across private equity, venture capital, private credit, private real estate and private infrastructure.

The fund has significant exposure to leading alternative asset managers, including Blackstone, KKR, Apollo Global Management and Brookfield Asset Management, which account for approximately 12.9%, 9.8%, 7.3% and 4.7% of the fund, respectively.

GPZ charges an annual fee of 0.40% and has a one-month average trading volume of about 164,000 shares. The fund has also amassed an asset base of $257.3 million. GPZ has gained about 8.3% over the past month and was up around 0.7% on Monday.

Tema Listed Private Managers ETF PRVT

Tema Listed Private Managers ETF employs an active strategy, seeking to provide a diversified exposure to publicly traded alternative asset managers across private equity, private credit, venture capital and real assets globally. The fund charges an annual fee of 0.75% and has gathered an asset base of $0.5 million.

The fund has a basket of 28 securities, with no single holding accounting for more than 5.55% of its exposure. PRVT has an exposure of 54.33% to the United States, followed by Canada (14.1%) and the U.K. (13.54%).

ETFs for Diversified Access to the Financial Sector

Broad-based financial ETFs offer investors a diversified way to capture potential benefits from the AI financing boom.

Investors can consider State Street Financial Select Sector SPDR ETF XLF, Vanguard Financials Index Fund ETF Shares VFH, Invesco KBW Bank ETF KBWB, iShares U.S. Financials ETF IYF and iShares U.S. Financial Services ETF IYG.

Among the mentioned funds, XLF and VFH have a Zacks ETF Rank #1 (Strong Buy). Meanwhile, IYF and IYG have a Zacks ETF Rank #2 (Buy). XLF is the cheapest option among the mentioned funds, charging an annual fee of 0.08%. XLF is also the most liquid fund, having a one-month trading average of about 32.59 million shares.

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This article originally published on Zacks Investment Research (zacks.com).

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