Private Credit and Asset-Backed Securities for GPU Financing

Private credit and asset-backed securities (ABS) are now the primary funding mechanisms for AI infrastructure. Companies that buy thousands of GPUs, get loans by using the GPUs as collateral, the same way airlines got loans using Boeing 747s in the 1990s. Over $20 billion in GPU-backed debt exists as of early 2026, and growing. ^{[1]Dave Friedman, "Neoclouds Hold More Than $20 Billion in GPU-Backed Debt" (February 2026)https://davefriedman.substack.com/p/neoclouds-hold-more-than-20-billion}

Why AI infrastructure needs to borrow money

A single 8-GPU H100 server can cost $400,000. A 576-GPU training cluster costs $35-36 million. Scaling to tens of thousands of GPUs, the minimum for competitive AI training, requires billions.

Hyperscalers fund this with their own cash: Microsoft spent $80 billion on AI CapEx in fiscal 2025, Amazon committed $100 billion, Google pledged $75 billion.

Everyone else uses debt.

• CoreWeave raised $7.5 billion in debt in May 2024. ^{[2]CNBC, "AI startup CoreWeave raises $7.5 billion in debt, Blackstone leads" (May 2024)https://www.cnbc.com/2024/05/17/ai-startup-coreweave-raises-7point5-billion-in-debt-blackstone-leads.html}
• Lambda secured a $500 million GPU-backed facility in April 2024. ^{[3]BusinessWire, "Lambda Announces $500M GPU-Backed Facility to Expand Cloud for AI" (April 2024)https://www.businesswire.com/news/home/20240402148086/en/Lambda-Announces-500M-GPU-Backed-Facility-to-Expand-Cloud-for-AI}
• Nscale closed a $1.4 billion GPU-backed loan in February 2026. ^{[4]Nscale, "$1.4bn Delayed Draw Term Loan Backed by GPUs" press release (February 2026)https://www.nscale.com/press-releases/nscale-signs-1-4bn-delayed-draw-term-loan}
• xAI closed a $5.4 billion compute infrastructure transaction through an SPV in January 2026. ^{[5]Apollo Global Management, "Apollo Backs $5.4 Billion Valor and xAI Data Center Compute Infrastructure Transaction" press release (January 2026)https://ir.apollo.com/news-events/press-releases/detail/599/apollo-backs-5-4-billion-valor-and-xai-data-center-compute}

What is private credit

Private credit is lending by non-bank institutions: asset managers, private equity firms, and specialty finance companies. The private credit market was small before the 2008 financial crisis. In fact, before private credit, syndicated loans, where groups of banks jointly wrote loans was the dominant way to lend. ^{[6]Georgetown Financial Policy Institute, "The Explosive Growth of Private Credit" (2025)https://finpolicy.georgetown.edu/wp-content/uploads/2025/06/The-Explosive-Growth-of-Private-Credit.pdf}

Post-2008 financial crisis, rules like Basel III forced banks to hold more capital before making loans, making syndicate loans far less profitable. JPMorgan cut mid-market lending ~15% between 2010 and 2013; Bank of America pulled back ~20%. ^{[7]Chateau Capital, "A Primer on Private Credit: A Post Great Financial Crisis Regulatory Arbitrage" (2025)https://www.chateau.capital/blog/private-credit-primer-post-gfc-regulatory-arbitrage} New regulations like Dodd-Frank (2010) and the Volcker Rule (2014) also barred banks from taking certain risks altogether.

On top of this, private funds were looking for a method to generate higher returns during the ZIRP era (zero-interest rate policy, 2008-2021) when government bonds only paid 2%. Private credit was seen to be that method, as it offered 8-12%.

Private credit grew from $250 billion in 2008 to $600 billion by 2015, capturing 40% of mid-market lending. The number of funds grew from 100 to over 1,080. Today the market exceeds $2.1 trillion. ^{[6]Georgetown Financial Policy Institute, "The Explosive Growth of Private Credit" (2025)https://finpolicy.georgetown.edu/wp-content/uploads/2025/06/The-Explosive-Growth-of-Private-Credit.pdf}The firms dominating GPU financing (Blackstone, Apollo, PIMCO, Blue Owl, Magnetar) built their platforms during this post-2008 expansion.

How asset-backed securities (ABS) work

A bond is a tradable loan: you lend money now, and get paid back with interest, and you can sell/transfer the loan to someone else. ABS is a bond where those payments come from a specific pool of assets.

The concept started with home loans. A bank lends to a homeowner, who pays it back monthly for 30 years with interest. That loan is an asset to the bank: it produces a predictable stream of cash. The asset is the loan, not the house. The house is just collateral, what the bank can seize if the borrower stops paying.

In 1970, the U.S. government through Ginnie Mae took thousands of these home loans, pooled them together, and sold bonds backed by all of the payments. That was the first mortgage-backed security. ^{[8]Seattle Times, "Ginnie Mae Pool No. 1: A Revolution Is Paid Off" (September 1999)https://archive.seattletimes.com/archive/19990919/2983955/ginnie-mae-pool-no-1-a-revolution-is-paid-off} By the mid-1980s, the same structure had expanded to auto loans, credit card receivables, student loans, and equipment leases. The U.S. ABS market is roughly $1.6 trillion as of early 2026.

How the pool gets built

An investment bank pulls together hundreds or thousands of similar loans from the banks that originally made them. It groups these into a pool: say 1,000 home loans collectively worth $500 million, each generating monthly payments.

Splitting the pool into tranches

The investment bank could sell one bond backed by the whole pool. But different investors want different things. A pension fund wants safety, even if it means lower returns. A hedge fund wants higher returns and will accept more risk. So the bank slices the pool's cash flows into layers called tranches. Each tranche is a separate class of bond with its own risk and return.

A typical structure: 60% of the pool's loans become AAA-rated senior bonds (safest, lowest returns), 15% as AA, 15% as BBB, and 10% as an equity tranche (riskiest, highest returns). The investment bank chooses the sizes and structure based on what investors are willing to buy, then hires rating agencies, Moody's, S&P, or Fitch, to independently assess each tranche.

How payments and losses flow

As borrowers make their monthly payments, the cash flows to the bond holders in strict order. Senior tranches, such as AAA, get paid first. Only after they receive their full payment does money flow to the next tranche. The equity tranche gets whatever is left.

Losses flow in the opposite direction. Instead of sharing losses evenly or as pro-rata percentages, the junior tranches absorbs the first losses. Imagine the houses in the previous example had to be sold for less than its original value, who gets the money from the house sales? Any money made recovered would go to the senior tranches, and if it's insufficient, the junior tranches wouldn't get anything.

This loss waterfall is what make ABS special. By taking the same underlying asset, you can create different combinations of risk and return for different types of investors. Many institutional investors, such as pension funds and insurance companies, can only hold bonds above a certain rating since these funds cannot afford to lose capital.

The SPV

A special purpose vehicle (SPV) or special purpose entity (SPE) is a legal entity created by a parent company for a single narrow purpose. If the SPV defaults, lenders can only seize the SPV's assets, not the parent company's other business assets.

CoreWeave's SPV, CCAC IV, entered a credit agreement in May 2024 with Blackstone and Magnetar as lead lenders. ^{[9]CoreWeave, S-1 registration statement filed with the SEC (March 2025)https://www.sec.gov/Archives/edgar/data/1769628/000119312525044231/d899798dex108.htm [10]SEC EDGAR, CoreWeave Compute Acquisition Co. IV, LLC credit agreement filings (2024-2025)https://www.sec.gov/Archives/edgar/data/1769628/000119312525044231/d899798dex1013.htm}

Meta created an SPV for its $30 billion Hyperion data center in Louisiana. Blue Owl owns 80%; Meta retains 20% and operates the facility. Over $27 billion in debt stays off Meta's balance sheet. ^{[11]Reuters, "Meta set to clinch nearly $30 billion financing deal for Louisiana data center site" (October 2025)https://www.reuters.com/legal/transactional/meta-set-clinch-nearly-30-billion-financing-deal-louisiana-data-center-site-2025-10-16/ [12]Fortune, "Meta's $27 billion bet turns AI compute into Wall Street's hottest new investment" (October 2025)https://fortune.com/2025/10/31/metas-27-billion-bet-turns-ai-compute-into-wall-streets-hottest-new-investment/}

xAI's SPV, Valor Compute Infrastructure L.P., purchases GB200 GPUs and leases them back to xAI. Apollo provided $3.5 billion in financing for the $5.4 billion transaction. ^{[5]Apollo Global Management, "Apollo Backs $5.4 Billion Valor and xAI Data Center Compute Infrastructure Transaction" press release (January 2026)https://ir.apollo.com/news-events/press-releases/detail/599/apollo-backs-5-4-billion-valor-and-xai-data-center-compute}

Oracle has created multiple SPVs for data center projects: $13 billion for an Abilene, Texas facility (backed by Blue Owl and JPMorgan), $38 billion for Texas and Wisconsin sites, and $18 billion for New Mexico. ^{[13]Longbridge, "Oracle, Meta, xAI, CoreWeave move $120B of AI debt off books using Wall Street SPVs" (2025)https://longbridge.com/en/news/270721000}

By early 2025, over $120 billion was structured through SPVs for AI data center projects. ^{[13]Longbridge, "Oracle, Meta, xAI, CoreWeave move $120B of AI debt off books using Wall Street SPVs" (2025)https://longbridge.com/en/news/270721000}

How GPU-backed lending works

A GPU-backed loan uses the hardware and its revenue contracts as collateral. The borrower creates an SPV, which purchases GPUs from OEMs (Original Equipment Manufacturers) and receives financing from lenders.

Goldman Sachs estimates $736 billion in AI infrastructure investment by end of 2026; Morgan Stanley projects $2.9 trillion cumulative by 2028. ^{[14]Bird & Bird / Lexology, "GPU-Based Financing in the Global Data Center Market" (2025)https://www.lexology.com/library/detail.aspx?g=71bf28ab-ce78-46ba-be78-9c9a09464767} Roughly one-third of that will be funded through GPU-backed private credit and ABS.

Typical loan structures as of early 2026: ^{[15]AltStreet, "GPU Depreciation & Obsolescence Risk" reference guide (January 2026)https://altstreet.investments/reference/risk/gpu-depreciation [16]Electron Economics, "Are GPUs and Power Demand a Circular Doom Loop?" (December 2025)https://electroneconomics.substack.com/p/are-gpus-and-power-demand-a-circular}

CoreWeave's August 2023 deal, the first GPU-backed facility at scale, set the template: $2.3 billion from Magnetar Capital and Blackstone, collateralized by NVIDIA H100 GPUs. ^{[17]Reuters, "CoreWeave raises $2.3 billion in debt collateralized by Nvidia chips" (August 2023)https://www.reuters.com/technology/coreweave-raises-23-billion-debt-collateralized-by-nvidia-chips-2023-08-03/}

Lambda sells on-demand compute without long-term contracts, so its $500 million facility from Macquarie was secured by GPUs and cash flow alone, making it harder to underwrite without contracted revenue. ^{[18]Reuters, "Lambda secures $500 mln loan with Nvidia chips as collateral" (April 2024)https://www.reuters.com/technology/lambda-secures-500-mln-loan-with-nvidia-chips-collateral-2024-04-04/ [3]BusinessWire, "Lambda Announces $500M GPU-Backed Facility to Expand Cloud for AI" (April 2024)https://www.businesswire.com/news/home/20240402148086/en/Lambda-Announces-500M-GPU-Backed-Facility-to-Expand-Cloud-for-AI}

A delayed-draw term loan (DDTL) lets the borrower draw funds only as GPUs are purchased, so lenders don't fund idle capital. Nscale and CoreWeave's later facilities used this structure. ^{[4]Nscale, "$1.4bn Delayed Draw Term Loan Backed by GPUs" press release (February 2026)https://www.nscale.com/press-releases/nscale-signs-1-4bn-delayed-draw-term-loan}

The first GPU ABS deals

In early 2025, the first GPU-backed ABS closed: a $1.1 billion deal where AAA-rated bonds were priced just above government bonds. ^{[14]Bird & Bird / Lexology, "GPU-Based Financing in the Global Data Center Market" (2025)https://www.lexology.com/library/detail.aspx?g=71bf28ab-ce78-46ba-be78-9c9a09464767} Rating agencies treated GPU financing as comparable to car loans or equipment leases.

Switch, a leading data center operator, completed four ABS transactions totaling $3.5 billion between March 2024 and October 2025, including the first AAA-rated tranche in a non-hyperscaler data center ABS. ^{[19]Switch, "$3.5 Billion in Securitized Debt Financings" press release (2025)https://www.prnewswire.com/news-releases/switch-announces-3-5-billion-in-securitized-debt-financings-302410252.html [20]Switch, "$659 Million in Fourth Data Center ABS Offering" press release (October 2025)https://www.switch.com/switch-raises-659-million-in-fourth-data-center-abs-offering/} Yondr Group closed a £532 million ($670 million) ABS for its London campus in February 2026. ^{[21]Yondr Group, "£532m ABS for London Campus" (February 2026)https://datacentremagazine.com/news/yondrs-hattrick-in-london-532m-abs-for-data-centre-campus}

Historical precedents for collateral-backed lending

Aircraft: the success story

Aircraft lease securitization started in 1992. By 1994, Northwest Airlines issued the first enhanced equipment trust certificate (EETC), a structure for borrowing using aircraft as collateral. ^{[22]NYU Stern / Ian Giddy, "Aircraft Lease Securitization: ALPS to EETCs"https://pages.stern.nyu.edu/~igiddy/ABS/bowers2.html} U.S. airlines issued over $35 billion in EETCs between 1994 and 2021. ^{[23]Acuity Knowledge Partners, "Aircraft Securitization Market Trends 2025" (2025)https://www.acuitykp.com/market-guide/aircraft-securitisation-past-present-and-future/} Leasing companies also pooled fleets of 20-100 aircraft into securities, adding billions more.

After 9/11 shut down air travel, aircraft ABS traded at distressed prices. ^{[24]ISTAT Learning Lab, "EETC Slide Presentation" (2021)https://istat.org/Portals/0/ISTAT%20Online/Session%20PDFs/EETC_ISTATLearning%20Lab.pdf} But planes are long-lived assets, and markets recovered after enough time.

Taxi medallions: the cautionary case

NYC taxi medallions (licenses to operate a taxi) were treated as stable, appreciating collateral. Banks lent against them at up to 90%+ of their value. The city capped the number of medallions, creating scarcity. Values had risen almost continuously since the 1930s.

That changed when Uber entered New York in May 2011. ^{[25]NCUA, "Timeline of the NYC Taxi Medallion Crisis"https://ncua.gov/news/responding-collapse-new-york-city-taxi-medallion-market/timeline-nyc-taxi-medallion-crisis} By November 2014, medallion prices had fallen 20% to $840,000. By 2015, they hit $750,000, a 29% decline from peak. ^{[26]New York Times, "New York Taxi Medallion Prices Fall Again" (December 2014)https://www.nytimes.com/2014/12/03/upshot/new-york-taxi-medallion-prices-fall-again.html} By May 2021, the average medallion sold for $79,106, a 92% drop from peak. As of 2022, prices had partially recovered to ~$144,000, still 86% below the high. ^{[27]NYC Taxi & Limousine Commission, monthly medallion auction and sale data (2013-2022)}

Four NYC credit unions held $2.5 billion in medallion loans. By mid-2015, Melrose had $400 million in delinquencies; LOMTO's delinquent loans jumped from $73,000 to $9 million in 12 months. ^{[25]NCUA, "Timeline of the NYC Taxi Medallion Crisis"https://ncua.gov/news/responding-collapse-new-york-city-taxi-medallion-market/timeline-nyc-taxi-medallion-crisis} All four were shut down or taken over by regulators between 2015 and 2018. Medallion Financial lost over 60% of its stock value. ^{[28]Forbes, "Medallion Financial Becomes House Of Cards As Ride-Hailing Apps Hammer Yellow Taxi Market" (January 2017)https://www.forbes.com/sites/debtwire/2017/01/03/medallion-financial-becomes-house-of-cards-as-ride-hailing-apps-hammer-yellow-taxi-market/} ConnectOne Bancorp exited taxi lending entirely. ^{[29]American Banker, "The slow remaking of the taxi-medallion loan market" (2017)https://www.americanbanker.com/news/the-slow-remaking-of-the-taxi-medallion-loan-market}

Who is lending and why

These firms earn 8-12% on secured lending versus 4-5% on investment-grade corporate bonds. The spread compensates for illiquidity (these loans can't easily be sold), technology risk, and borrower concentration.

With over $2.1 trillion in AUM, private credit firms have a lot of capital to deploy. ^{[6]Georgetown Financial Policy Institute, "The Explosive Growth of Private Credit" (2025)https://finpolicy.georgetown.edu/wp-content/uploads/2025/06/The-Explosive-Growth-of-Private-Credit.pdf} AI infrastructure is one of the few asset classes large enough: a $7 billion GPU deal is more efficient to underwrite than fifty $140 million mid-market loans.

Early GPU-backed deals were bespoke, requiring months of negotiation on depreciation, collateral valuation, and loan conditions. As more deals close, terms are converging. The first AAA-rated GPU ABS in early 2025 was a standardization milestone.

Meta's $30 billion Hyperion SPV and Apollo's $7 billion xAI deal dwarf the 2023-2024 facilities. Private credit firms are now competing for anchor positions in $10 billion-plus transactions, attracting sovereign wealth funds and insurance companies.

References

1. Dave Friedman, "Neoclouds Hold More Than $20 Billion in GPU-Backed Debt" (February 2026)
2. CNBC, "AI startup CoreWeave raises $7.5 billion in debt, Blackstone leads" (May 2024)
3. BusinessWire, "Lambda Announces $500M GPU-Backed Facility to Expand Cloud for AI" (April 2024)
4. Nscale, "$1.4bn Delayed Draw Term Loan Backed by GPUs" press release (February 2026)
5. Apollo Global Management, "Apollo Backs $5.4 Billion Valor and xAI Data Center Compute Infrastructure Transaction" press release (January 2026)
6. Georgetown Financial Policy Institute, "The Explosive Growth of Private Credit" (2025)
7. Chateau Capital, "A Primer on Private Credit: A Post Great Financial Crisis Regulatory Arbitrage" (2025)
8. Seattle Times, "Ginnie Mae Pool No. 1: A Revolution Is Paid Off" (September 1999)
9. CoreWeave, S-1 registration statement filed with the SEC (March 2025)
10. SEC EDGAR, CoreWeave Compute Acquisition Co. IV, LLC credit agreement filings (2024-2025)
11. Reuters, "Meta set to clinch nearly $30 billion financing deal for Louisiana data center site" (October 2025)
12. Fortune, "Meta's $27 billion bet turns AI compute into Wall Street's hottest new investment" (October 2025)
13. Longbridge, "Oracle, Meta, xAI, CoreWeave move $120B of AI debt off books using Wall Street SPVs" (2025)
14. Bird & Bird / Lexology, "GPU-Based Financing in the Global Data Center Market" (2025)
15. AltStreet, "GPU Depreciation & Obsolescence Risk" reference guide (January 2026)
16. Electron Economics, "Are GPUs and Power Demand a Circular Doom Loop?" (December 2025)
17. Reuters, "CoreWeave raises $2.3 billion in debt collateralized by Nvidia chips" (August 2023)
18. Reuters, "Lambda secures $500 mln loan with Nvidia chips as collateral" (April 2024)
19. Switch, "$3.5 Billion in Securitized Debt Financings" press release (2025)
20. Switch, "$659 Million in Fourth Data Center ABS Offering" press release (October 2025)
21. Yondr Group, "£532m ABS for London Campus" (February 2026)
22. NYU Stern / Ian Giddy, "Aircraft Lease Securitization: ALPS to EETCs"
23. Acuity Knowledge Partners, "Aircraft Securitization Market Trends 2025" (2025)
24. ISTAT Learning Lab, "EETC Slide Presentation" (2021)
25. NCUA, "Timeline of the NYC Taxi Medallion Crisis"
26. New York Times, "New York Taxi Medallion Prices Fall Again" (December 2014)
27. NYC Taxi & Limousine Commission, monthly medallion auction and sale data (2013-2022)
28. Forbes, "Medallion Financial Becomes House Of Cards As Ride-Hailing Apps Hammer Yellow Taxi Market" (January 2017)
29. American Banker, "The slow remaking of the taxi-medallion loan market" (2017)
30. Crusoe, "$750 million credit facility from Brookfield" press release (June 2025)
31. GlobeNewsWire, "Upper90 Closes $225M Credit Facility to Crusoe" (March 2025)