Unlike debt-laden startups, tech giants are funding AI buildouts with cash and can weather a downturn. They fully expect smaller, leveraged competitors to go bankrupt, creating a strategic opportunity to purchase their data center assets for pennies on the dollar, thereby reducing their own future capital expenditures.

Large tech companies are creating SPVs—separate legal entities—to build data centers. This strategy allows them to take on significant debt for AI infrastructure projects without that debt appearing on the parent company's balance sheet. This protects their pristine credit ratings, enabling them to borrow money more cheaply for other ventures.

Private credit has become a key enabler of the AI boom, with firms like Blue Owl financing tens of billions in data center construction for giants like Meta and Oracle. This structure allows hyperscalers to expand off-balance-sheet, effectively transferring the immense capital risk of the AI build-out from Silicon Valley tech companies to the broader Wall Street financial system.

In a novel financing structure, Blue Owl covered the cost of Meta's new data center and paid Meta a $3B upfront fee. This secures Meta as a high-quality, long-term tenant, de-risking the massive infrastructure investment for the private credit firm.

The enormous capital needed for AI data centers is forcing a shift in tech financing. The appearance of credit default swaps on Oracle debt signals the re-emergence of large-scale debt and leverage, a departure from the equity and free-cash-flow models that have characterized the industry for two decades.

Cash-rich hyperscalers like Meta utilize Special Purpose Vehicles (SPVs) to finance data centers. This strategy keeps billions in debt off their main balance sheets, appeasing shareholders and protecting credit ratings, but creates complex and opaque financial structures.

Meta is using off-balance-sheet "special purpose vehicles" (SPVs) to finance its AI data centers. This financial engineering obscures the true scale of its capital commitments by keeping massive debt and assets off its main balance sheet, a tactic explicitly compared to the controversial methods used by Enron.

Cash-rich tech companies avoid owning data center infrastructure not due to a lack of funds, but because their capital yields far higher returns in core technology. They strategically outsource the lower-margin, stable infrastructure assets to specialized investors, optimizing their return on invested capital.

Trillion-dollar AI investments are often funded using decades-old off-balance-sheet vehicles like "contingent make-whole guarantees." This obscures the true credit risk, which relies on the guarantee of a large tech tenant, not the underlying assets (e.g., a data center).