Nuway Capital has launched the world’s first regulated GPU bond, allowing retail investors to own part or all of a GPU and capitalise on the booming demand for AI infrastructure.

Intrigued, The Tech Capital set out to learn more.

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GPU’s role in AI

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In today’s rapidly evolving technological landscape, GPUs (Graphics Processing Units) have emerged as indispensable components of the AI revolution.

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Originally designed for rendering images in gaming and visual media, GPUs have evolved into powerhouse processors capable of handling the massive parallel computations required for artificial intelligence, machine learning, and data analytics.

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Unlike traditional CPUs, which excel at sequential tasks, GPUs can process thousands of operations simultaneously, making them ideal for training complex AI models and running inference at scale.

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As AI applications permeate industries, from autonomous vehicles and healthcare diagnostics to financial modelling and creative content generation, the demand for GPU-powered infrastructure has skyrocketed.

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How are investors gaining access to this growth?

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This shift has placed GPUs at the core of modern computing, driving innovation, enabling breakthroughs, and creating unprecedented opportunities for both developers and investors.

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The value of GPU’s is clear for all to see. Nvidia, the consensus market leader in AI-ready chips, has been the poster child of financial markets attempts to cash in on the AI revolution.

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As it smashed through sales records quarter after quarter, its stock is up a ridiculous 785% since January 2023, and its market capitalisation has exceeded that of Microsoft, Amazon and Alphabet (Google’s parent company) to make it the second most valuable company in the world.

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Outside of owning Nvidia stock, investors could look to buy into the big tech players that are swallowing up Nvidia GPU’s and designing their own to profit off their computing power.

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Or failing that, they could invest in publicly listed data centre operators, where these GPU’s are stored, powered and work their magic.

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Private capital too is flowing into the data centre market from private equity, infrastructure, real estate and debt funds all looking for their slice of the pie.

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The story behind Nuway’s GPU bond

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But one investment manager is taking things even further. Nuway Capital, an investment manager formed by entrepreneurs from a range of diverse backgrounds has launched the first ever regulated GPU-bond.

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In a recent conversation with The Tech Capital, Colin Bosher, Nuway Capital’s COO told us how, and why Nuway had cooked up this innovative approach to investing in GPU’s.

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When asked about the backstory of Nuway Capital’s GPU investment model, Bosher traced the roots back over a decade.

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“With a long-established background in technology sector market research and next-generation SaaS platform development, we have been exposed to hosted computing on a global scale since 2010,” he said.

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As the cloud evolved, so too did the founders perspectives on computing infrastructure, leading the group to believe it was becoming clear that GPUs would increasingly complement and displace CPUs.

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This realisation led Nuway to explore the GPU market in greater depth, eventually encountering a novel investment opportunity.

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The team were increasingly being exposed to GPU cloud providers, who were taking institutional money to fund their growth as AI and other processor hungry applications rapidly accelerated the demand for the infrastructure.

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“One such cloud operator was taking a slightly different approach,” Bosher revealed.

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This AI cloud was allowing a broader spectrum of investors to acquire Nvidia systems in return for a large percentage of the occupancy revenue. As opposed to owning its own cloud hardware, it become a broker between AI startups, big tech using GPUaaS models and investors that would own part or all of those GPUs.

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Bosher describes the investment opportunity as offering attractive annual returns and the potential for high growth, and so Nuway invested to experience, and stress test the legitimacy of the model.

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“The monthly returns were sufficiently impressive and so we continued to research, develop, and improve the model,” he says.

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How does it work?

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Whereas a conventional bond sees a sum of money loaned for a set term, and interest payments returned to the lender at regular intervals until the full amount is paid back, Nuway’s GPU bond works slightly differently.

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Instead of lending the capital as cash, it’s used to acquire GPU hardware. Investors purchase into the bond and the funds are used to acquire GPU’s sitting in a partner data centre with an AI cloud run by Nuway’s partner.

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The income generated from the GPU is reinvested to acquire more infrastructure, creating a compounding effect. The target growth rate is more than 50% per year.

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As revenue is reinvested, the bond’s value increases, along with the investor’s share.

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Because of the compounding effect with the continual purchase of more GPU’s, forecasting by Nuway shows that the returns over a several year period are more attractive than simply buying the hardware itself.

In a nutshell:

• Investors pool funds to acquire GPUs housed in a partner data centre.
• Revenue generated by these GPUs is reinvested to purchase more hardware, creating a compounding effect.
• Over time, the bond’s value grows, and investors benefit from increasing returns.

The impact of the bond

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Bosher says he is seeing significant interest in the bond. But it’s not just investors that win this way. GPUaaS or AI cloud providers can benefit too.

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“The main commercial benefit to GPUaaS providers who support this commercial model is in its ability to dramatically accelerate growth, whilst retaining founder investor share capital,” Bosher says.

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Over the past two years, AI cloud valuations have skyrocketed. For example, Coreweave has seen its valuation grow from US$9 billion in December 2023 to around US$23 billion as of its latest capital raise. It is reported to be targeting a 2025 IPO at a valuation of US$35 billion.

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“Once such GPU Cloud Providers reach the point of critical mass, they can then begin to generate enough cash to reinvest into their own wholly owned systems and then rapidly increase their enterprise value,” Bosher adds.

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“There is no reason why such operators cannot continue to run both models (the NuWay model and institutional equity and debt raises) in parallel to better accelerate their international growth ongoing.”

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For investors, the GPU bond offers a unique opportunity to benefit from AI’s explosive growth without the volatility of stock markets, and without the significant capital contributions required for private equity investments.

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Just as the GPUaaS model aims to democratise access to AI training infrastructure, Nuway’s bond aims to democratise access to investing in AI infrastructure.

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Pricing fluctuations

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As the GPUaaS market matures, the GPU per hour rate has fallen significantly. From US$16 an hour just one year ago, there have already been reports of AI cloud providers offering GPU’s for just US$2 or even US$1 for an hour.

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This decline is not something Bosher is worried about. “Our cloud provider occupancy rates were always established at a far lower cost per GPU per hour than the hyperscalers and so have managed to maintain the original rates of return,” he says.

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The GPU Bond also continually invests in the latest Nvidia systems, which demand the highest hourly rates and occupancy time.

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“Our current capital growth via the regulated bond is 50% IRR (Internal Rate of Return) /ARR (Accounting Rate of Return)  and so we could potentially offer lower returns, whilst remaining highly compelling,

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“The compound growth dynamic within the bond will also serve to offset any potential attrition of the hourly rate should we experience a reduction further down the line,” he adds.

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In the face of a rapidly shifting GPU infrastructure market, with new technology, end users and providers springing up at every step, a long-term, resilient investment model is hard to come by.

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AI is seen as a major investment opportunity and has the potential to offer significant returns.

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However, despite more use cases and adoption emerging throughout 2024, cries that a bubble may soon burst have not completely died down.

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Either way, the increased methods for which investors can gain exposure demonstrate the enthusiasm of the market, and Nuway’s is likely to be just one of the first.