Learning from Nvidia's boost to chip sales, AMD provides guarantees for loans to "AI cloud".

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AMD is using financial "guarantees" to accelerate AI chip shipments in order to catch up with Nvidia's leading advantage in data center AI chips.

According to The Information, citing sources, AMD will provide substantial collateral for a $300 million loan to data center and cloud services startup Crusoe, with Goldman Sachs as the lender. The funds will be used to purchase AMD AI chips and install them in a data center in Ohio.

Sources say the loan will be collateralized by the chips and related equipment. As part of the guarantee arrangement, if Crusoe cannot find customers willing to use the chips, such as AI developers, AMD has agreed to rent the chips from Crusoe, thus providing Crusoe with a "demand guarantee".

This approach continues Nvidia's previous path of expanding "GPU rental cloud," and it has sparked investor controversy: Such structures may boost chip sales in the short term, but they expose chipmakers to greater risk if AI demand slows.

Transaction Structure: $300 million loan collateralized by chips and equipment, AMD promises to "guarantee rental"

According to The Information, quoting insiders, Crusoe's $300 million loan comes from Goldman Sachs, collateralized by AMD chips and related equipment, which Crusoe will deploy in an Ohio data center. The data center is being built by Canadian developer 5C, supported by Brookfield.

Sources said, AMD's guarantee is centered on the "ultimate lessee" arrangement, meaning if Crusoe cannot find external customers to utilize the computing power, AMD will lease the chips.

This arrangement helps Crusoe reduce the loan rate to about 6%, significantly lower than the financing terms possible without the guarantee.

Copying Nvidia's Path: Using Funds and Commitments to Cultivate "GPU Rental Cloud" and Drive Chip Demand

The Information pointed out, Nvidia previously relied on stronger financial resources to support a group of cloud companies that lease its chips to developers, and enhanced their financing ability through investment and capacity purchase commitments.

Among them, Nvidia invested in CoreWeave and agreed to purchase computing capacity that CoreWeave could not sell to other customers. CoreWeave established its first debt financing arrangement in 2023, totaling $2.3 billion, backed by Nvidia chips and customer contracts.

Similar financing is spreading. London-based Nscale announced this month it had obtained a $1.4 billion loan from institutions including Pimco and Blue Owl Capital, with a spokesperson saying the loan is collateralized by company contracts and chips.

Catch-Up Pressure: CEO Sets Target, AMD Ups Unconventional Promotion Strategies

This Crusoe financing arrangement highlights AMD is using more non-traditional methods to compete for the AI chip market. The Information reported that AMD CEO Lisa Su once said she hopes to achieve annual AI chip sales of "tens of billions of dollars" next year and capture at least one-tenth of the market share.

The report also mentioned Crusoe's debt financing occurred after a deal AMD made in October last year. At that time, AMD reached an agreement with OpenAI to sell chips with up to 6 gigawatts of power capacity to be used in the coming years. As part of the deal, OpenAI can opt to purchase up to 10% of AMD's shares as it meets certain milestones.

Cloud vendors are also keeping pace. Piotr Tomasik, COO of cloud startup TensorWave, which leases AMD chips, said all parties are "using every strategy" to expand market share, and TensorWave is also promoting debt issuance, though no further details were disclosed.

Controversy and Exposure: After Sales Are "Financialized," Risk Cycles Back to Manufacturers Along With AI Cycles

Criticism from investors regarding AMD and Nvidia's deals focuses on the financing and guarantee clauses potentially "artificially" inflating sales volume and reallocating the risk of slowing growth back to chipmakers and related participants.

For Crusoe, such financing provides ammunition for expansion and IPO preparation. The Information said investors value Crusoe at about $10 billion, and it may go public as early as this year.

Crusoe previously estimated that from last year through the early next decade, the company will burn $2 to $4 billion in cash annually, and plans to achieve $18 billion in annual cloud business revenue by decade's end.

For the market, AMD's move to "guarantee AI cloud loans" may accelerate the pace at which its AI chips enter data centers, but also means deeper client integration, increasing performance sensitivity to fluctuations in AI computing demand.

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