AMD to “effectively guarantee” a loan to AI startup Crusoe that will be used to purchase its chips

Advance Micro Devices will “effectively guarantee” a $300 million loan to data center company Crusoe from Goldman Sachs, according to The Information. Crusoe is taking out a loan to purchase AMD’s chips, and the chips that it’s purchasing are being used as collateral for that loan.

You’d be forgiven for thinking that this sounds an awful lot like a very common form of borrowing done by American families: borrowing money to buy a house, and having the home be collateral for the mortgage.

One big difference, of course, is that your home is expected to appreciate in value, while AI chips are expected to depreciate in value as they’re used.

Another difference is that AMD, per the report, has agreed to rent these chips from Crusoe if it can’t find customers for this compute, which helped reduce the interest rate Crusoe will pay on this loan.

Similarly, in September, Nvidia agreed to buy any of CoreWeave’s unused cloud computing capacity through April 13, 2032, for $6.3 billion.

Everyone wants AI chips. AMD sells AI chips. And yet, in both this deal and the most high-profile one we know about (AMD’s pact with OpenAI), the chip designer seems like it has to go the extra mile to get companies to use its AI chips. As part of the OpenAI agreement, AMD issued warrants that enable the ChatGPT developer to receive 160 million shares, or about 10% of the company, if certain operational and stock price targets are hit over time.

The Takeaway

Rather than get overly hung up on “circular financing” elements, we’d probably frame the issue here like this: why is it so tough to get buyers on normal terms? This either says something negative about the financing environment for AI startups or the perception of AMD’s AI chips.