- Blackstone’s tactical opportunities group led a $2.3 billion private credit loan to CoreWeave in 2023, the first major deal of its kind and the blueprint for chip-backed debt. Three years on, that market is on track to become a trillion-dollar market, eclipsing even the borrowings used to build the data centers that house the chips.
- The deals keep growing: Broadcom is working with Wall Street firms on a $60 billion debt transaction for an entity that would buy TPUs and lease them to Anthropic, SpaceX is in talks to raise $40 billion for Nvidia chips, and Nvidia has announced a $500 billion partnership with six major lenders. JPMorgan analysts predict chip spending could exceed $3 trillion through 2030, with the majority likely funded by borrowing.
- Chips cost two to four times more than the data centers housing them yet depreciate over about five to six years, so lenders use special purpose vehicles and match debt maturities to that schedule. Backstops from Broadcom and Nvidia can lift deals to investment grade, as in Apollo and Blackstone’s $35 billion Big Sky deal for Anthropic, whose largest senior tranche pays 5.75% while a riskier $4.5 billion junior tranche priced at 8.5%.
- Stress is showing at the corporate level, with some of CoreWeave’s junk bonds sliding to around 80 cents on the dollar and yields of roughly 15%. Its two chip-backed leveraged loans, which the market views separately, have dipped only slightly and still trade near par.
What Happened?
Bloomberg detailed how the market began, with Blackstone executives asking CoreWeave’s leadership “What is a GPU?” and “Is AI real?” before committing. That first 2023 loan was backed by contracts with Microsoft, and CoreWeave had to borrow at a rate in the mid-teens. In March, CoreWeave raised an $8.5 billion debt package backed by Meta contracts, and because lenders priced the risk in line with Meta’s high credit rating, borrowing costs fell to roughly 6%. Others followed the playbook, including xAI, which used an SPV with nearly $11 billion of Apollo debt for Nvidia chips, and Nvidia, which assembled Apollo, Blackstone, BlackRock, Brookfield, KKR and Goldman Sachs in August and would backstop up to 25% of an opportunity.
Why It Matters?
Chip-backed debt ties a fast-growing slice of credit markets to AI’s profitability, and Fitch’s Jason Pompeii warned that vendor financing at an unprecedented scale concentrates risk, raising the chance of ripple effects through the supply chain if AI disappoints. Because most chip deals are private, lenders cannot easily sell positions that bind together a small group of chipmakers, cloud giants and neoclouds. Carlyle’s Akhil Bansal questioned how airtight customer contracts really are, asking, “If you have seven firms that are basically providing all the credit support for the GPUs, who’s got the leverage?” The flood of AI borrowing also threatens to drive up borrowing costs for other sectors as tech firms compete for finite capital amid rising interest rates.
What’s Next?
The industry’s next step is moving from private deals into syndicated loans and ultimately the investment-grade bond market, after CoreWeave became the first to bring chip deals to the syndicated market earlier this year with two leveraged loans. Bank of America strategists estimate that the AI XPV platform between Broadcom, Apollo and Blackstone, which could finance 20 gigawatts of capacity, may require $235 billion of backstopped debt by mid-2029. Evidence that chips are lasting longer than current accounting suggests could make them easier to finance and help a used-chip market develop. Chip financing could also get simpler for OpenAI and Anthropic once they go public, especially if they win investment-grade ratings.
Affected Tickers and Coins: BX, CRWV, NVDA, AVGO, APO
Source: Bloomberg
