Investors question data center loan valuations after Nvidia's $500B infrastructure financing move.

The biggest names in finance gave their blessing to the AI computing buildout this week, partnering with chipmaker Nvidia to promote the company's computing capacity as an "investable asset class." Larry Fink, CEO of BlackRock, one of Nvidia's financing partners, compared Nvidia's computing power assets to the "mortgage-backed securities market in the 1970s."

The financing announcement immediately raised questions about circular financing, but investors say the bigger issue is how exactly to value the assets that will be used as collateral for investments that are already straining capital markets. While auto loans and residential mortgages are long-established assets for asset-backed securities (ABS), instruments based on computing capacity are far trickier to underwrite.

"The question is how to underwrite and value data center-backed loans. These metrics are hard to establish given the extraordinarily short-term experience we have had with the asset class," said Dan Alpert, founding managing partner of Westwood Capital, in an interview with CNBC.

Wells Fargo traders noted in a Tuesday report that Nvidia's agreements with financial titans like KKR, Blackstone, and Apollo amount to a form of insurance for investors who are "less familiar and comfortable with GPU collateralization," referring to graphics processing units. "One outstanding question is whether this all means that AI factory loans will eventually become repackaged into collateralized loan markets," like ABS, mortgage-backed securities, or collateralized loan obligations, the Wells Fargo traders said.

Data centers burn through high-priced GPUs in only a few years, making depreciation rates and data center lifespan top concerns for investors. There's also the looming issue of additional computing capacity coming online from international competitors, particularly China.

"We know that these GPUs depreciate on only a five- or six-year schedule," said Paul Meeks, head of technology research at Freedom Capital Markets. "Even within technology, it's an emerging market where we don't get the final scorecard until probably years from now."

Investors are drawing parallels to previous attempts to turn technology infrastructure booms into investable asset classes. "Are data center-backed loans 'cheap' in ABS terms? Or are they the next fiber optic cable-backed loans—see Global Crossing," Alpert asked, referring to the major telecommunications bankruptcy during the dot-com boom that sought to turn fiber-optic cables into investable assets.

Famed investor Michael Burry said the Nvidia credit agreements had "shades of Enron." "This also has shades of Enron's effort to make wholesale power an investable class," Burry wrote on Substack. "Structuring unnatural credits to prolong momentum late in the bull phase is where the worry comes in."