Big Tech's AI Boom Leaves Investors Exposed

The AI boom in Big Tech is creating a new financial risk for investors. Technology companies like Nvidia, Meta Platforms, Broadcom, and others have provided up to $300 billion in guarantees supporting AI data centers and chips over the past year. This has allowed infrastructure buildout to accelerate while leaving much of the potential exposure outside conventional debt.

The structures typically guarantee a minimum future value for data centers or computing equipment owned by special-purpose entities, making projects easier and cheaper to finance. However, if those assets eventually fetch less than the guaranteed amount, the technology company becomes responsible for part of the shortfall.

Nvidia has agreed to provide up to $105 billion in support for SB Energy's Ohio data-center campus serving OpenAI, while also backing as much as 25% of certain other financing packages using Nvidia hardware. Broadcom has maximum exposure of about $29 billion from backing AI-rack leases connected to Anthropic.

Morgan Stanley estimates that seven major cloud and chip companies have accumulated more than $3.1 trillion in off-balance-sheet commitments and other credit support, a broader category than the $300 billion of guarantees themselves.