Abstract:
According to people familiar with the matter, Amazon is planning to sell about $8 billion worth of Nvidia's high-end chips to external investors through a newly established special vehicle to optimize its balance sheet. The company has held talks with investors in recent weeks to gauge market appetite for the deal. According to the plan, Amazon will spin off thousands of Grace Blackwell chips deployed in data centers across the United States and transfer them to a special purpose vehicle (SPV).
Amazon will then lease these high-end artificial intelligence chips back to the special purpose vehicle, which will introduce external investors through bond issuance. By transferring these high-priced semiconductor assets to investors, Amazon can shift to a more asset-light operating model on its balance sheet.
Amazon declined to comment.
The proposed operation comes as technology giants are looking for innovative ways to finance huge investments in data center infrastructure. Much of the cost of such infrastructure comes from the chips used to train advanced artificial intelligence models.
Technology companies are using a variety of means to move debt off their balance sheets to maintain their credit ratings. Companies would provide residual value guarantees, promising lenders the future value of a chip or data center, rather than raising debt directly to finance the project. The model masks the scale of risk the tech giants actually take.
Investors expect that relying on Amazon's current double-A rating, the carrier is expected to obtain an investment-grade credit rating, thus attracting a wider range of investors such as insurance and pension funds to participate in transactions.
Informed sources added that Amazon also plans to sell up to 10% of the equity of the carrier, which means that Amazon will no longer hold any shares in the entity. Negotiations between Amazon and investors are still ongoing, and the plan may change.
Informed sources said that the chips involved in this transaction were purchased or leased by Amazon and have been deployed in more than ten data centers in five states in the United States, including Nevada and Virginia.
Nvidia's Grace Blackwell chips are among the company's most advanced products, but will soon be replaced by newer Vera Rubin chips.
OpenAI, Anthropic and other leading artificial intelligence laboratories (Amazon has promised to invest up to 83 billion US dollars in both) use the latest generation of chips to train models; the previous generation of chips continues to be used for business application operations. Amazon expects each generation of semiconductor products to last at least five years, according to regulatory filings.
Amazon’s capital expenditures this year are expected to reach US$220 billion, most of which will be invested in its cloud business AWS to purchase high-end chips and expand artificial intelligence data centers.
Amazon has raised funds through the capital market to support the investment. In March this year, the company announced plans to issue approximately US$50 billion in corporate bonds; due to strong market demand, the fundraising scale was increased from the original US$37 billion. But when it issued $25 billion in bonds in July, demand in the long-term bond market weakened and investors demanded higher yields.
The financing model with graphics processors as collateral is very popular among companies such as CoreWeave, which rely on their stable ability to obtain chips to borrow and finance.
To help customers reduce borrowing costs, NVIDIA teamed up with large Wall Street institutions to set up a US$500 billion financing platform in August, promising to provide bottom-line support for up to US$12.5 billion of such debt.
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