The loans are typically taken out by special-purpose vehicles formed by tech companies and investment firms for the purpose of acquiring a cache of high-performing chips, which would then be leased to the tech businesses to train their AI models.<\/p>\n
This arrangement allows Big Tech groups, whose use of debt markets<\/a> is growing rapidly, to shift the loans off their corporate balance sheets. <\/p>\n Last month, Apollo announced a $3.5bn financing package for a digital infrastructure fund managed by Valor Equity Partners, which would buy Nvidia\u2019s GB200 hardware, known as AI superchips, and lease them to Elon Musk\u2019s xAI.\u00a0<\/p>\n IREN Limited, an AI cloud service provider, also secured $3.6bn in loan commitments from Goldman Sachs and JPMorgan earlier this month to buy chips for its AI contracts with Microsoft.<\/p>\n Lenders often have to act fast and write big cheques in these transactions, according to a lawyer familiar with GPU financing.\u00a0<\/p>\n \u201cA big player would basically ask, \u2018would you like to participate in a deal that closes in two weeks and throw in a couple hundred million?\u2019\u201d the lawyer said.\u00a0<\/p>\n The rising popularity of such loans highlights investors\u2019 clamour for asset-backed finance, where banks and private credit<\/a> funds seek esoteric debt secured by stable cash flows.\u00a0<\/p>\n Deals usually come with \u201chell or high water\u201d clauses that prevent tech companies from terminating the leases early, helping mitigate the risk that these GPUs become obsolete as AI technology quickly evolves.\u00a0<\/p>\n \u201cIt is a very new space and a lot of people are grappling with the question of GPU lifespan,\u201d said Dorina Yessios, US co-head of energy, infrastructure and natural resources at A&O Shearman. \u201cThat has to be factored into underwriting, just like any other equipment financing.\u201d<\/p>\n Moody\u2019s, which has begun to rate GPU-backed debt, said it withdrew credit ratings once underlying leases came to an end.<\/p>\n Recommended<\/p>\n
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