Advanced Micro Devices is utilizing financial guarantees to accelerate the shipment of its AI chips, aiming to close the gap with NVIDIA's leading position in data center AI processors. According to sources familiar with the matter, AMD will provide a material guarantee for a $300 million loan to Crusoe, a data center and cloud services startup. The loan, provided by Goldman Sachs, will be used by Crusoe to purchase AMD AI chips for installation in an Ohio data center.
Sources indicate the loan will be collateralized by the chips and related equipment. As part of the guarantee arrangement, AMD has agreed to lease the chips from Crusoe if the startup cannot find end customers, such as AI developers, thereby providing a "demand backstop." This strategy mirrors the path previously taken by NVIDIA to fuel the expansion of "chip rental clouds," though it has sparked debate among investors. Such structures may boost chip sales in the short term but could expose chipmakers to greater risk if AI demand slows.
The $300 million loan for Crusoe is secured by AMD chips and equipment, which will be deployed in a data center built by Canadian developer 5C, a company backed by Brookfield. The core of AMD's guarantee lies in the "last lessee" arrangement, ensuring AMD will lease the chips if Crusoe fails to find external customers for the computing power. This backing helped Crusoe secure a loan interest rate of approximately 6%, significantly lower than what might have been available without the guarantee.
NVIDIA has previously leveraged its stronger financial position to support cloud companies that rent out its chips to developers, enhancing their financing capabilities through investments and capacity purchase commitments. For instance, NVIDIA invested in CoreWeave and agreed to buy computing capacity that CoreWeave could not sell to other clients. CoreWeave established its first debt financing arrangement in 2023, a $2.3 billion facility backed by NVIDIA chips and customer contracts. Similar financing is spreading, with London-based Nscale recently announcing a $1.4 billion loan from institutions including Pimco and Blue Owl Capital, reportedly secured by company contracts and chips.
The Crusoe financing highlights AMD's increasing use of unconventional methods to compete in the AI chip market. AMD CEO Lisa Su has stated the company aims to achieve annual AI chip sales in the "tens of billions of dollars" next year and capture at least a tenth of the market. This deal follows an agreement AMD made with OpenAI last October, involving the sale of chips for up to 6 gigawatts of power usage over several years, with OpenAI having an option to purchase up to a 10% stake in AMD upon reaching certain milestones.
Cloud providers are also following suit. Piotr Tomasik, COO of cloud startup TensorWave, which leases AMD chips, stated that players are "using every strategy possible" to gain market share and confirmed TensorWave is also advancing its own debt issuance plans.
Investor criticism of such deals by AMD and NVIDIA centers on the potential for financing and guarantee clauses to artificially inflate sales figures while redistributing the risks of a growth slowdown back to the chipmakers and other participants. For Crusoe, this type of financing provides capital for expansion and preparations for a public listing. Crusoe is reportedly valued by investors at around $10 billion and could initiate an IPO as early as this year. The company has projected annual cash burn between $2 billion and $4 billion from last year into the early part of the next decade, with plans to achieve $18 billion in annual cloud revenue by the end of this decade.
For the market, AMD's move to guarantee an "AI cloud" loan could accelerate the deployment of its AI chips into data centers, but it also signifies a deeper binding with its customers and increased sensitivity to fluctuations in AI computing demand.
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