Key points
- Amazon explores $8 billion Nvidia chip financing deal
- A separate vehicle would own the hardware
- Amazon would lease the chips back
Amazon (AMZN) is exploring a deal to move about $8 billion of Nvidia (NVDA) chips into a separate vehicle funded by outside investors and then lease the chips back, according to the Financial Times. Amazon would continue using the hardware while bringing in outside financing.
The hardware includes thousands of Nvidia Grace Blackwell chips that Amazon bought or leased. They're installed in more than a dozen US data centers across five states, including Nevada and Virginia. Amazon has held talks with investors in recent weeks to gauge interest. Amazon and Nvidia didn't immediately respond to requests for comment.
Amazon shares closed up 1.3% at $251.52 on Oct. 2. Nvidia also gained 1.3%, to $233.95.
The vehicle would issue debt and could sell equity
The special-purpose vehicle would raise money by issuing debt and could sell an equity stake of up to 10% to investors. Amazon would then pay the vehicle to lease the chips.
Broadcom (AVGO) has taken a different route with Anthropic. The chipmaker agreed to lend Anthropic up to $42 billion to help pay for computing built on chips it designs with Google. In Amazon's case, outside investors would put up the money.
Investors' exposure would depend on the lease terms
Investors would be financing hardware whose future value is uncertain as Nvidia releases newer chips. Their exposure would depend on Amazon's lease payments, any guarantees and what the hardware is worth when the lease ends. Michael Burry has argued that the biggest cloud companies spread the cost of their AI hardware over too many years. Lenders are weighing the same risk in Nvidia's own financing plan. They want bigger guarantees before backing its $500 billion chip-backed financing plan, as they question how long the chips keep earning money.
