Amazon Considers Transferring $8 Billion Worth of Nvidia Chips to Off-Balance-Sheet Entity

Amazon is considering transferring nearly $8 billion worth of Nvidia "Grace Blackwell" chips, which are already installed in U.S. data centers, to an independent entity funded by third parties and then leasing them back. Reports, including one by SiliconAngle citing the Financial Times, noted that the deal is still under negotiation and that neither party has commented on it.

Under this structure, ownership of the hardware and associated debt would be transferred to the independent entity, removing them from Amazon's balance sheet. Investors in the entity are being offered a stake of up to 10% of the capital, amid expectations that it will obtain a high credit rating that lowers financing costs.

This type of arrangement serves as a financing tool rather than a permanent sale of assets, as Amazon remains the user of the chips and pays to lease them. The structure aims to avoid the burden of hardware-related debt on the company's credit rating at a time when investments in data centers and artificial intelligence are escalating.

Neither Amazon nor Nvidia has issued any comment, and the final terms have not been announced, meaning the structure may change or not be completed. Regional investors are watching this type of deal as it determines how major tech companies finance their computing expansions, a path closely linked to AI projects in the Arab region.

What do these terms mean?

Special Purpose Entity: A company created to carry out a specific transaction without other business activities. Balance Sheet: A statement showing a company's assets and liabilities. Leaseback: Selling an asset and then leasing it back from the buyer to continue using it. Credit Rating: An assessment of an entity's ability to repay debt, which determines its borrowing cost. "Grace Blackwell": A generation of Nvidia chips dedicated to running artificial intelligence models.