COWZ

Advanced Micro Devices Inc. (NASDAQ:AMD) is taking on billions of dollars in potential financial obligations to help customers build AI data centers, as it steps up its challenge to Nvidia Corp. (NASDAQ:NVDA).

AMD’s lease guarantees jumped 88% in just three months, from $4.1 billion in June to $7.7 billion in September. Another $750 million in debt guarantees brings the total potential exposure to approximately $8.5 billion.

If its partners run into financial trouble, AMD could be on the hook for as much as $8.5 billion.

AMD has also signed another $13.3 billion in data-center leases that haven’t started yet. It plans to pass the facilities on to partners, but could still be left paying the rent if those partners can’t.

Why AMD Is Backing Data Centers

AMD is helping customers secure data centers where its chips can be installed, potentially generating billions in future sales.

On Tuesday’s earnings call, Bank of America analyst Vivek Arya questioned whether customers had sufficient financing, land and power to support roughly 3 gigawatts of planned AMD deployments in 2027.

CEO Lisa Su said AMD was working closely with customers to prepare infrastructure years in advance.

“We know where the GPUs are going in terms of which data centers and which locations,” Su said, adding that AMD was being “selective and strategic” about investing alongside partners.

A July deal with Core Scientific Inc. (NASDAQ:CORZ) shows how AMD is helping create a market for its own chips.

Core Scientific agreed to provide data-center capacity for 529 megawatts of computing. AMD leased 377 megawatts itself and provided financial backing for a cloud provider taking the remaining 152 megawatts.

That helps secure the facilities where AMD’s processors can be deployed, but also leaves the chipmaker exposed if its partners cannot pay.

And there’s a potential reward beyond chip sales. AMD received warrants to buy up to 30 million Core Scientific shares at $23.47 each, with its rights increasing as more capacity is leased.

Nvidia Is Playing the Same Game

Nvidia is pursuing a similar strategy on a much larger scale.

Its August filing revealed $108.5 billion in potential guarantees, including $105 billion backing a massive Ohio data center leased to OpenAI.

In return, the 4.25-gigawatt campus will use Nvidia’s AI hardware almost exclusively. Nvidia estimates each generation of equipment installed there could generate $150 billion to $200 billion in revenue.

The guarantees take effect in stages starting in fiscal 2029, with payments required only if OpenAI defaults.

No Defaults So Far

AMD ended September with $15.8 billion in cash and short-term investments. No commercial partners had defaulted, and AMD had made no guarantee payments.

But the chipmaker warned that financing problems, permitting delays or partners failing to meet their obligations could force it to make payments “without realizing the anticipated economic benefits.”

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