> Someone has to come up with $1.4 trillion in actual cash, fast, or this whole thing comes crashing down.

These deals aren't for 100% payment up front. The deals also include stock, not just cash. So, no, they do not need to come up with $1.4 trillion in cash quickly.

This AWS deal is spread over 7 years. That's $5.4 billion per year, though I assume it's ramping up over time.

> At the end of all this circular financing and deals are folks that actually want real cash (eg electricity utilities that aren’t going to accept OpenAI shares for payment).

Amazon's cash on hand is on the order of $100 billion. They also have constant revenue coming in. They will not have any problem accepting OpenAI shares and then paying electricity bills with cash.

These deals are also being done in the open with publicly traded companies. Investors can see the balance sheets and react accordingly in the stock price.

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mandevil 3 days ago | parent | next [-]

Interestingly, it looks like there is a move away from financing these data centers with tech company cash-on-hand and moving to Special Purpose Vehicles over the past 18 months or so. So now there is a lot more debt involved in funding DC's than equity, in ways that are a sudden change to what was largely a funded-by-equity process at the beginning of 2024.

The one I found best documented (1) is a Meta's SPV to fund their Hyperion DC in Louisiana, which is a deal that is 80% financed by private credit firm Blue Owl. There is a lot of financial trickery to getting the SPV to be counted by the ratings agencies as debt belonging to a different entity that does not count against Meta's books but treated by the market as basically something that Meta will back. But xAI's Memphis DC is also a SPV, and Microsoft is doing that as well. I'm not sure about AMZN, but that we're starting to see that from their competitors suggests they will also be going to this way.

1: By the invaluable Matt Levine, here: https://www.bloomberg.com/opinion/newsletters/2025-10-29/put... but the other major companies have their own SPV's

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brendoelfrendo 3 days ago | parent [-]

I saw this, and honestly, it's kind of silly. We all know what's going on, so why do the credit ratings agencies play dumb to this kind of financial engineering? Why don't they just say "actually no, we all know that's debt and it's owned by Meta so we will consider it when rating their credit."?

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lesuorac 3 days ago | parent | next [-]

IIUC, they ignore it because they're supposed to.

If the market collapses I think Meta can technically just walk away and they lose access to those data centers (which they no longer want anyways) and the SPV is stuck holding $X of assets with $>X liabilities and the issues of the credit are on the hook but not Meta.

And investors are fine being on the hook because they get a higher return from the SPV bonds than Meta bonds. (risk adjusted it's probably the same return).

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JumpCrisscross 3 days ago | parent | prev | next [-]

> We all know what's going on

Do we?

The payments Meta et al are making to the SPV are payments for data-center services. The data centers are then buying the assets and issuing the debt. Now, Meta is obligated to make those payments to the SPV. Which looks like debt. But they are only obligated to do so if the services are being provided.

Blue Owl, meanwhile, owns 80% of the datacentre venture. If the price of chips crashes, that's Blue Owl's problem. Not Meta's. If Meta terminates their contract, same deal. (If Beijing nukes Taiwan and the chips quintuple in value, that's Blue Owl's gain. Mostly. Not Meta's.)

> Why don't they just say "actually no, we all know that's debt and it's owned by Meta so we will consider it when rating their credit."?

If Meta stopped paying the SPV, the SPV would have the recourse of a vendor. If Meta stopped making payments on its bonds, that would trigger cross defaults, et cetera. Simply put, Meta has more optionality with this structure than it would if it issued its own debt.

The red flag to keep an eye out for are cross guarantees, i.e. Meta, directly or indirectly, guaranteeing the SPV's debt.

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cmiles8 3 days ago | parent | prev | next [-]

Because, to quote from The Big Short, “if we don’t give them the rating they want they’ll just walk down the street and go to [the other ratings agency].”

Does that make any sense? No.

	▲	nickff 3 days ago \| parent [-]
		In the case of “The Big Short” it did make sense, because the ratings were required by the government, not the purchasers (who often/usually disregarded the ratings for the purpose of valuation), and the sellers paid for the ratings.

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rchaud 3 days ago | parent | prev | next [-]

Because in credit ratings game, the customer is paying to get their bonds rated. Therefore the customer is always right.

	▲	JumpCrisscross 3 days ago \| parent [-]
		> the customer is paying to get their bonds rated. Therefore the customer is always right Then Meta would do this in a wholly-controlled off balance sheet vehicle à la Enron. The fact that they're involving side cars signals some respect for their rating.

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eiifndjj18484 3 days ago | parent | prev [-]

the point is to get pension money into the market, whilst ringfencing the risk in an SPV so that when/if it pops, it’s none of the people who do actually know what’s happening that will be affected. And they’ll potentially be shorting it on the way down as well

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slg 3 days ago | parent | prev [-]

>These deals are also being done in the open with publicly traded companies. Investors can see the balance sheets and react accordingly in the stock price.

I'm no expert on the specifics of the circular financing we're seeing here so the rest of what you wrote might be true, but I know enough about how Wall Street and the world in general works to know that closing with this as a defense shows an incredible naivete that makes me question everything else you have said.

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epistasis 3 days ago | parent | next [-]

Indeed, a comment above linked to Matt Levine's newsletter on the off-books debt that is showing up instead as things like JVs, and here's another Bloomberg Reporter, Carmen Arroyo, covering it from a more journalistic angle:

https://www.bloomberg.com/news/articles/2025-10-31/meta-xai-...

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refulgentis 3 days ago | parent | prev | next [-]

No need for all that, the idea OpenAI is committed to $1.4 trillion in pay is a Ed Zitron-sourced number where he calculates $400B based on a number he made up for how much a gigawatt costs, and the trillion figure by multiplying further by claiming every deal is for 2026 and will be repeated over next N years.

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peaseagee 3 days ago | parent | prev [-]

Exactly. Enron was a publicly traded company doing weird circular financing stuff. It was all in the open for anyone who cared to look. Just no one did until the music stopped...

	▲	refulgentis 3 days ago \| parent [-]
		We’re a bit too far if we assert this. The weird circular Enron stuff wasn’t all in the open, was by wholly owned subsidiaries, and the downfall was massive trading losses that could no longer be hidden by shuttling money to and from subsidiaries at the right time. A hole in a balance sheet is quite different from a purchase done by financing, thus “circular financing” when applied to both means “things we worry about that involve payments between 2 entities”