Learning from NVIDIA stimulates chip sales, AMD guarantees loans for "AI Cloud"

AMD is using financial "backing" 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 informed sources, AMD will provide substantial guarantees for a $300 million loan to the data center and cloud services startup Crusoe, with Goldman Sachs as the lender. The funds will be used to purchase AMD's AI chips and install them in a data center in Ohio.

Informed sources stated that the loan will be secured by chips and related equipment. As part of the guarantee arrangement, if Crusoe cannot find customers willing to use these chips, such as AI developers, AMD will agree to rent these chips from Crusoe, thereby providing "demand backing" for Crusoe.

This approach continues the path previously promoted by NVIDIA to expand "rental cloud" services, and has sparked controversy among investors: Such structures may boost chip sales in the short term but will expose chip manufacturers to greater risks when AI demand slows.

Transaction Structure: $300 million loan secured by chips and equipment, AMD promises "rental backing"

According to The Information citing informed sources, the $300 million loan obtained by Crusoe comes from Goldman Sachs, secured by AMD chips and related equipment, which Crusoe will deploy in its data center in Ohio. This data center is being built by Canadian developer 5C, supported by Brookfield.

Informed sources indicated that the core of AMD's guarantee lies in the "last renter" arrangement, meaning that when Crusoe cannot find external customers to absorb the computing power, AMD will rent these chips.

This arrangement helps Crusoe lower the loan interest rate to about 6%, significantly below the financing conditions it might obtain without backing.

Replicating NVIDIA's Path: Using funds and commitments to nurture "rental cloud" and drive chip demand

The Information pointed out that NVIDIA previously leveraged its stronger financial strength to support a number of cloud companies renting its chips to developers, enhancing these companies' financing capabilities through investments 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, amounting to $2.3 billion, supported by NVIDIA chips and customer contracts.

Similar financing is also spreading. London-based Nscale announced this month that it has secured a $1.4 billion loan from institutions including Pimco and Blue Owl Capital, with a spokesperson stating that the loan is secured by company contracts and chips.

Pressure to Catch Up: CEO sets share target, AMD intensifies unconventional promotional tactics

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

The report also mentioned that Crusoe's debt financing occurred after a transaction with AMD last October. At that time, AMD reached an agreement with OpenAI to sell chips that could be used over the next few years, totaling up to 6 gigawatts of power. As part of the deal, OpenAI has the option to gradually purchase up to 10% of AMD shares upon reaching specific milestones.

Cloud vendors are also following suit. Piotr Tomasik, COO of cloud startup TensorWave, which rents AMD chips, stated that all parties are "exhausting every strategy" to expand market share, and noted that TensorWave is also advancing its debt issuance, but did not disclose further details.

Controversy and Exposure: Risks Return to Manufacturers After Sales are "Financialized"

Investors criticize transactions like those between AMD and NVIDIA, arguing that financing and backstop clauses may "artificially" inflate sales figures while reallocating the risks of slowing growth back to chip manufacturers and related parties.

For Crusoe, this type of financing provides ammunition for expansion and preparation for an IPO. The Information reported that Crusoe is valued by investors at around $10 billion and may initiate its public listing as early as this year.

Crusoe had previously projected that its annual cash burn would be between $2 billion and $4 billion from last year until the early part of the next decade, while planning to achieve annual revenue of $18 billion in its cloud business by the end of this decade.

For the market, AMD's recent action of "guaranteeing loans for AI cloud" could accelerate the pace at which its AI chips enter data centers, and also means a deeper binding with its customers, increasing the sensitivity of its performance to fluctuations in AI computing power demand.