Big Tech’s chip-backed SPVs reportedly reach $300 billion

What is a Special Purpose Vehicle?

A special purpose vehicle (SPV) is a separate legal box that allows companies to borrow money and buy assets without showing the debt on their balance sheet. In the case of Big Tech companies, these SPVs are used to finance data center buildouts and chip purchases.

How the $300 Billion Got Built

Private credit giants like Blackstone and Apollo Global Management have backed chip-backed financing arrangements, which have grown more popular as demand for AI infrastructure keeps climbing. The $300 billion in chip-collateralized debt has been accumulated over the past year, with companies like Alphabet and Anthropic using SPVs to finance their operations.

Risks for Lenders and Investors

The use of SPVs raises concerns about the value of the collateral and the long-term risks for lenders and investors. Chips are the asset backing these loans, and AI hardware loses value quickly as newer generations arrive. This means that if a borrower stumbles years into a lease, the GPUs left in the SPV may be worth far less than the debt they were meant to secure.

What This Means for Big Tech

For shareholders in Big Tech, the main issue is visibility. When less than 2% of Alphabet's guarantees appear on its balance sheet, the headline numbers can understate how much the company has actually committed to the AI buildout.

Industry Trends

The pace of activity from mid-September through October points to a coordinated industry push to find financing that can keep up with AI's appetite for compute. Nvidia has announced a financing platform designed to attract more than $500 billion in third-party capital for chip-backed financing.