Big Tech’s AI Boom Is Hiding Hundreds Of Billions In Financial Risk

Big Tech companies are using hundreds of billions of dollars in guarantees to finance the artificial intelligence boom while keeping much of the exposure from appearing as conventional debt on their balance sheets.

Technology companies issued as much as $300 billion in guarantees tied to AI data centers and chips over the past year, according to a Financial Times analysis. The structures are helping companies fund massive infrastructure projects without taking on the full balance-sheet burden of financing them directly.

The arrangements, known as residual value guarantees, typically involve a technology company promising that chips, data centers or other infrastructure will retain a minimum value in the future. If the assets are later sold or leased for less than that amount, the company providing the guarantee could be responsible for part of the difference.

The financing has become increasingly attractive as technology companies race to secure computing capacity while trying to preserve their investment-grade credit ratings and access to relatively cheap corporate debt.

Morgan Stanley analysts estimated seven major cloud and semiconductor companies accumulated more than $3.1 trillion in off-balance-sheet commitments and other forms of credit support.

S&P Global Ratings separately warned that special-purpose vehicles, vendor financing, backstop agreements and residual value guarantees can “increase debt-like exposure, obscure risk, and create financial interdependencies.”

The guarantees generally back debt issued by special-purpose vehicles rather than the technology companies themselves. Those entities own the chips or data centers, allowing Big Tech companies to support the financing without immediately recording the entire obligation as debt.

Broadcom took on roughly $29 billion in exposure in June as part of a deal involving chips that will ultimately be leased to Anthropic. The financing arrangement was developed alongside Google as part of a broader effort to supply computing infrastructure to the AI company.

Broadcom told investors it believed the guarantees were unlikely to be triggered because of the profitability of major AI developers and the expected value of the assets backing the financing.