What are circular financing and SPVs in AI, and should they worry anyone?

Picture a bakery that lends a café money, and the café uses that money to buy bread from the same bakery. The bakery records a sale. Is that real demand? If people are lining up for sandwiches, the loan simply helped a good customer grow. If the sandwiches are not selling, the bakery has counted its own money as revenue and now holds a shaky loan too.

That is the whole debate over circular financing in AI, except that the sums reach into the tens of billions. The arrangements are mostly legal and openly disclosed; the question is how much real outside demand sits behind them.

Real deals, in plain terms

A warrant, in the AMD row, is the right to buy shares at a set price. Here it is close to a free discount on chips, payable in AMD stock, if everything goes well.

The Nvidia guarantee is the newest form. Nvidia does not hand over cash. It promises to cover part of the rent and power bills if the tenant, an OpenAI affiliate, defaults. The guarantee starts with each phase's lease and shrinks as OpenAI pays, and it ends if OpenAI earns a satisfactory credit rating. In return the site runs on Nvidia hardware, with limited exceptions. Its filing shows $99 billion of equity investments in total and another $25 billion committed.

How an SPV works

"SPV" stands for special purpose vehicle: a company created for one project. It borrows money, builds or buys an asset, and its lenders are repaid from that asset's income. Meta's Hyperion campus in Louisiana is the clearest case, because Meta describes it in detail.

1. In October 2025 Meta and funds run by Blue Owl Capital formed a joint venture. Blue Owl's funds hold 80%, Meta 20%.
2. The venture will cover about $27 billion in development costs, partly with debt sold to PIMCO and other bond investors.
3. Blue Owl's funds put in about $7 billion in cash, and Meta took out about $3 billion.
4. Meta rents the campus on a four-year initial lease, with renewal options up to 20 years in total.
5. Meta also gives a residual value guarantee: if it walks away and the campus is worth less than an agreed amount, Meta covers the shortfall, up to a cap.

Meta's accountants concluded it is not the "primary beneficiary," since it does not control the decisions that most affect the venture's economics. So the venture's assets and debt do not appear on Meta's balance sheet.

But Meta's exposure did not vanish, and the quarterly report states it. With a second venture in Texas added in July 2026, Meta's maximum exposure to loss is $68.4 billion, including $41.5 billion in residual value guarantees. Meta says payments under these guarantees are not probable, so it has recorded no liability.

xAI used a related structure. SpaceX's prospectus lists three equipment leases with Valor, an investment firm whose founder sits on SpaceX's board. Payments over their life total about $20.2 billion, and SpaceX or a subsidiary guarantees them. Here the computers belong to the lessor, and the lab pays to use them.

The case for and against

The International Monetary Fund and the Bank of England have both flagged leverage and opacity in AI financing. The Bank warned in July that increasingly complex debt structures could add to financial stability risks.

Accounting adds one more loop. Amazon recorded $62.8 billion of upward adjustments on its Anthropic preferred stock in the first nine months of 2026, based on prices in Anthropic's own funding rounds. Microsoft recorded $10.0 billion of revenue from OpenAI in a single quarter and holds an equity stake of about 24%, with $7.2 billion still owed to it by OpenAI at the end of September.

What would show that a deal carries real risk?

First, look at where the customer's money comes from. A customer whose revenue from outside users is growing faster than its obligations is in a stronger position than one that needs a new funding round to pay its bills.

Second, read the exit terms. A four-year lease with a residual guarantee, a contract cancellable on 90 days' notice and a 20-year lease all behave differently in a downturn.

Third, follow the resale value. An SPV's lenders depend on the campus keeping its worth. If chips or buildings lose value faster than expected, guarantees that look remote can become real bills. This article explains these structures and does not suggest buying or selling any security.