Amazon Moves to Offload $8 Billion in Nvidia Chips

Amazon is exploring an $8 billion deal to offload thousands of Nvidia Grace Blackwell chips from its balance sheet. According to a report from the Financial Times, the company plans to transfer the chips into a special-purpose vehicle (SPV), which would then raise funds through debt issuance. Amazon would lease the chips back from the SPV, effectively reducing its direct ownership of these expensive components.

The chips are currently being installed in over a dozen data centers across five U.S. states, including Nevada and Virginia. This move is seen as a strategy to adopt a more asset-light approach, potentially strengthening Amazon's financial position. The company has been in discussions with investors to gauge interest and may offer up to a 10% equity stake in the SPV.

Amazon's stock has seen an 18% increase over the past six months, with a current price of $252 as of October 2. Analysts have set a price target of $331 for the stock. The company's significant capital expenditures, totaling around $220 billion this year, are primarily driven by investments in AI and AWS. CEO Andy Jassy has indicated that these expenditures will impact free cash flow in the short term but are necessary to meet future demand.

Despite the financial maneuvering, demand for AWS remains robust, with revenue growing 36.7% last quarter and a backlog reaching $496 billion. Jassy has noted that Amazon will struggle to meet demand through 2026 and 2027, highlighting the ongoing need for substantial investments. The outcome of the SPV deal and its impact on costs will be critical factors for investors to watch.