Despite Nvidia Corp.’s (NASDAQ:NVDA) massive second-quarter earnings blowout, the BlackRock Investment Institute is urging investors to become more selective within AI as higher interest rates make the capital-intensive buildout more expensive and hyperscalers increasingly turn to debt.
As hyperscalers aggressively build out AI infrastructure, BlackRock is urging investors to look beyond the AI model race and focus on scarce physical bottlenecks such as chips, power and data-center infrastructure.
The $100 Billion Debt Warning
In its latest weekly commentary, BlackRock highlighted growing financial strain downstream in the AI ecosystem. The firm warned that hyperscalers are running down their cash reserves and leaning heavily on debt markets. “U.S. hyperscaler investment-grade bond issuance has topped $100 billion this year, more than twice the 2025 total,” the report noted.
Because of higher interest rates and massive capital requirements, BlackRock advises investors to “look beyond the AI model race for more opportunities as capital gets more expensive.”
The Nvidia Contrast
This cautionary stance stands in stark contrast to Nvidia’s record-breaking momentum. The semiconductor giant just reported second-quarter fiscal 2027 revenue of $96.2 billion, up 106% from a year ago, with Data Center revenue jumping 117% to $89.0 billion.
Nvidia CEO Jensen Huang emphasized the relentless demand for infrastructure during the earnings call. “The AI infrastructure buildout is at full steam,” Huang declared. He noted that as AI becomes more productive, “compute is revenue” for cloud providers.
Time to Pivot to Bottlenecks
To navigate this new economic regime, BlackRock suggests a targeted strategy. The firm urged investors to “stay selective within AI and track where value is accruing.”
Rather than betting on software or hyperscalers burdened by debt, BlackRock is shifting focus to the scarce resources required for the AI buildout. The firm observed that “companies tied to scarce AI bottlenecks – including power, chips and data center infrastructure – are outperforming those further downstream.”
Potential beneficiaries of these bottlenecks include nuclear and power companies such as Constellation Energy Corp. (NASDAQ:CEG) and Bloom Energy Corp. (NYSE:BE), liquid cooling leaders like Vertiv Holdings Co. (NYSE:VRT), and essential memory suppliers like Micron Technology Inc. (NASDAQ:MU) and SanDisk Corp. (NASDAQ:SNDK).
By targeting these fundamental bottlenecks, investors can capitalize on Nvidia’s momentum while avoiding the mounting debt risks in the broader AI space.
How Has Nvidia Performed in 2026?
At the last check, the NVDA stock was trading 0.34% lower in premarket trading on Tuesday. It was up 18.38% year-to-date, advanced by 26.75% over the last year, and rose 24.60% over the last six months. It closed 1.48% higher at $220.78 per share on Monday.
Benzinga’s Edge Stock Rankings indicate that NVDA maintains a strong price trend in the short, long, and medium terms, with a solid growth score.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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