Goldman’s latest cash cow is all about funding the AI infrastructure boom
Wall Street’s largest banks are riding a lucrative new wave — bankrolling the AI gold rush. Goldman Sachs was a key facilitator in this week’s artificial intelligence funding announcements from both Nvidia and Intel . These are just two of several recent high-profile wins, providing a financial windfall for the venerable investment bank. All three of the stocks are major positions in the CNBC Investing Club portfolio. It started Monday, when Nvidia said that Goldman and five other financial institutions would combine efforts to raise $500 billion of financing to fund the AI buildout. The revenue-generating compute infrastructure serves as the cash flow-yielding collateral for those funds, much like commercial real estate or toll roads. Jim Cramer called the Nvidia idea, which is still a bit light on exact details on how all this would work, “monumentally positive.” Hours earlier, Intel announced a $15 billion common stock offering (later upsized to $20 billion), with Goldman as a joint book-running manager. The proceeds from the sale will help fund the expansion of Intel’s foundry as it seeks more chip contract manufacturing business. There have been rumors of big-name interest in Intel’s foundry because Taiwan Semiconductor , the world’s largest chip manufacturer, is maxed out on capacity. Last month, Intel won business from Fortinet to produce the cybersecurity company’s next-generation security chip. In the semiconductor industry, factories are called foundries. The Intel stock sale followed Alphabet ‘s June announcement that the Google parent was selling $80 billion in stock (later upsized to $85 billion) to fund its own AI ambitions. Goldman was at the wheel, helping to steer this one as well. As shareholders of Alphabet, we weren’t thrilled by the decision because it dilutes shares, but as Goldman investors, we saw it as another feather in its cap. Jim viewed Intel’s stock sale a bit differently. He still sees Goldman’s involvement as great for the bank, but also thinks the move gives Intel some wiggle room as the company is ramping up a major new revenue stream in third-party chip production. The disclosure of Intel CEO Lip-Bu Tan’s role as a major buyer in the offering was a nice bonus, as we like it when top executives demonstrate confidence with their own checkbooks. How Goldman benefits As a joint book-running manager, the bank captures fees across every step of these transactions. Goldman buys shares from the original issuer (Intel or Alphabet) at a discount and resells them to institutional clients (hedge funds, pension funds, and sovereign wealth funds) at the public offering price. The difference between what Goldman pays the issuing company and what it charges institutional buyers is the gross spread. That spread is divided into three buckets, which includes an underwriting fee for taking on the inventory risk, a management fee for structuring and timing the deal, and a selling concession for the sales desk that actually…
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