AI Company's Around $70 Billion Shadow Credit Guarantee Sparks Bond Market Concerns, Nvidia May Provide Hundreds of Billions of Dollars in Additional Value Support

BlockBeats News, August 16th - According to Bloomberg, bond investors are paying attention to the potential off-balance-sheet obligations of large AI companies, estimated at around $700 billion. As the AI chip financing scale expands, such "residual value support" arrangements may further increase. Following NVIDIA's announcement of a $500 billion financing partnership this week, it may also provide several hundred billion dollars in residual value support for related debt transactions.

This type of financing is usually conducted through special purpose vehicles borrowing to purchase chips and relying on the cash flow generated by usage contracts to repay the debt; if customers stop payments, the related assets will be re-leased or sold to repay the debt, and if there is still a gap, it will be supplemented by the guarantor. NVIDIA CEO Jensen Huang stated that the company can provide residual value support for up to a maximum equivalent of 25% of the project based on specific projects.

CreditSights analysts stated that this is actually similar to NVIDIA's "selling of put options": the cost is very low during the AI boom phase, but if the industry suddenly undergoes a severe downturn, customers default, and hardware values drop, the importance of the related collateral will significantly increase. Rating agencies have also begun to view some arrangements as debt-like or contingent liabilities.

Prior to this, Meta had adopted a similar structure in around $27 billion and $13 billion data center debt financings; while Broadcom provided most of the residual value support for the related $35 billion AI chip financing of Anthropic. Moody's warned that if such transactions increase significantly in the short term, it may limit Broadcom's financial flexibility and create pressure on its credit profile.