Big Tech uses guarantees to keep $300bn of AI exposure off balance sheets

Big Tech companies are rapidly expanding their use of guarantees to back debt for AI data centres and chips, issuing up to $300bn in commitments in less than a year while recording little of that exposure on their balance sheets.

First used by Meta on a huge data centre project last autumn, so-called residual value guarantees have been taken up by Broadcom as part of its chip financing deal for Anthropic and by Nvidia to offer support to OpenAI and other customers buying its chips.

These arrangements, under which tech companies guarantee a minimum future value for chips or data centres, join a growing set of creative financing structures embraced by Big Tech to accelerate the AI infrastructure boom. According to an FT analysis, tech giants have offered up to $300bn in these guarantees in the past 12 months alone.

Bankers describe the guarantees as “balance-sheet efficient”. They typically backstop debt that is issued not by the tech companies themselves but by special-purpose vehicles that own the infrastructure, allowing the tech groups to lend their financial strength to the deals without needing to fully book the liabilities.

The rise of guarantees adds a layer of exposure if Big Tech’s multitrillion-dollar bet on AI does not pay off because of disappointing usage, an oversupply of computing power or the failure to build sustainable business models around the technology.

“There has been a significant expansion in off-balance-sheet exposure over the past year,” said Doug Colandrea, senior director at credit rating firm KBRA. “That adds a very high degree of complexity to their credit risk profiles.”

As their AI spending plans begin to outrun their cash flows, tech companies have become more focused on managing their balance sheets in order to keep their investment-grade credit ratings and maintain access to the deepest pools of low-cost corporate debt.

Overall, Morgan Stanley analysts have tallied more than $3.1tn in off-balance-sheet commitments and credit support by seven hyperscalers and chipmakers.

“There is concern about all these future commitments because everyone is in a race to get the compute,” said Tim Musial, head of fixed income at CIBC Private Wealth US.

For lenders, the residual value guarantees from Big Tech help to alleviate concerns about current technology quickly becoming obsolete as they put up tens of billions to finance AI data centres and chips. The tech companies agree to cover specified shortfalls if these assets one day have to be sold or re-let and fetch less than a guaranteed minimum value.

Their introduction to AI financing has unlocked cheaper financing for projects with these guarantees, which typically price at just a 100 to 150 basis-point premium to the guarantor’s own debt, according to people familiar with the matter.

Broadcom was the first chipmaker to adopt the guarantees this year, taking on $29bn in exposure in June to sell 1GW of chips to an SPV that will lease them to Anthropic. The guarantee is part of a complex vendor-financing programme Broadcom and Google put together to supply chips to the AI laboratory.

Broadcom’s recent quarterly filing showed the credit support had little impact on its own balance sheet. People familiar with the matter said the chipmaker would probably offer guarantees to help finance some of its planned chip deliveries next year, which included another 5GW of chips for Anthropic as well as 1.3GW of custom chips for OpenAI.

The company told investors that “the strong profitability trajectory of the leading frontier AI labs and the sustaining value of the underlying assets” meant there was a low probability of triggering such guarantees.

Last month Broadcom’s rival Nvidia unveiled a similar vendor financing programme. The chipmaker said it could offer residual value support of up to 25 per cent on deals being put together by Goldman Sachs and a group of Wall Street investors aiming to collectively muster $500bn of capital for Nvidia-powered AI infrastructure.

Nvidia also extended $105bn in guarantees to SB Energy, a SoftBank subsidiary building a massive data centre campus in Ohio for OpenAI.

The chip group, led by Jensen Huang, will record no balance sheet liability until OpenAI’s leases begin in 2028, and even then the guarantee structure will limit the weight on its books. In exchange, the campus will exclusively run Nvidia hardware for 20 years.

Bankers at Morgan Stanley and Goldman Sachs have been at the heart of putting the deals together.

“[Residual value guarantees] have a clear contractual mechanism whereby the asset has to be monetised through a competitive sale process, and that asset value is then netted against any exposure under the guarantee,” said Richard Myers, head of structured products capital markets at Morgan Stanley, who introduced the structure to AI infrastructure.

Because the guarantor only covers the gap between the sale price and the guaranteed value, residual value guarantees “get more efficient balance-sheet treatment than a typical payment guarantee,” he said.

Meta was the first tech group to embrace the structure for AI financing, providing a $28bn residual value guarantee to support its joint venture with Blue Owl developing the 2GW Hyperion data centre in Louisiana. The project stretches across 4mn square feet and is expected to come online by 2030, drawing enough power to supply about 1.5mn homes.

“Owning and capitalising one’s own data centres on the balance sheet is very capital intensive,” said Myers, who spent months designing the guarantee structure so Meta could enjoy some of the ownership benefits without the full balance-sheet burden.

The guarantees ultimately helped raise $27bn of debt for the data centre within 150bp of Meta’s own bonds, with little exposure recorded on Meta’s books. The tech group used a similar structure in July to support a 1GW data centre being built in El Paso.

While the guarantees are mostly off-balance-sheet, credit rating agencies say they do make adjustments to tech groups’ leverage figures to reflect them.

Analysts at S&P say they add the amount by which the guaranteed value exceeds their own estimate of what the data centre or chips would fetch in a stressed sale.

Pierre Georges, S&P Global’s head of infrastructure research, said the biggest gap he had seen between stressed value and debt on any residual value guarantee deal was about 25 per cent, which on a $20bn structure would add a roughly $5bn leverage adjustment to the guarantee provider’s liabilities.

For Meta specifically, Georges said S&P took a “pretty harsh haircut” to the valuation of the Hyperion data centre, but still concluded it was worth more than the debt it backed, meaning no adjustment to Meta’s leverage was needed.

“The reality we see today is that the gap, even with the stressed value, is closer to zero most of the time,” he said.