Amazon raises Nvidia cloud prices by 15%

Amazon announced a 15% price increase for its EC2 Capacity Blocks cloud service, effective next week. The service provides customers with access to computing power on Nvidia chips ranging from older A100 to newer B300 models.

This move comes as the company explores complex financial engineering to fund its massive artificial intelligence infrastructure buildout. Amazon is discussing the creation of a special-purpose vehicle to acquire up to $8 billion worth of Nvidia's latest Grace Blackwell chips for its US data centers.

Amazon explores off-balance-sheet chip financing via SPV

The proposed special-purpose vehicle would purchase the Nvidia chips and then lease them back to Amazon for its operations. To fund the acquisition, the SPV would raise money from outside investors, primarily by issuing debt. As part of the arrangement, Amazon may offer these outside investors an equity stake of up to 10% in the vehicle itself.

This structure is designed to keep the expensive hardware off Amazon's corporate balance sheet. By leasing the equipment instead of owning it outright, Amazon's reported asset growth would slow. Key profitability ratios, which compare earnings to the company's asset base, could appear stronger under this model.

Financial and strategic implications of the lease structure

The economic commitment to the AI chips does not disappear. It is shifted into long-term lease obligations. Credit analysts typically treat these lease obligations as real, ongoing claims on a company's cash flow. The discussion of this financing strategy was reported last Friday. The approach could make Amazon's aggressive AI infrastructure expansion appear less capital-intensive on paper, potentially easing investor concerns about massive spending.

Potential market innovation: AI-chip-backed debt

If executed, the deal could pioneer a new segment within the debt market. It would involve bonds backed by the lease payments from Amazon and collateralized by the underlying AI chips themselves. The performance of such bonds would hinge on two main factors: Amazon's long-term credit quality and the enduring utility and value of the specialized hardware over time.

Amazon may proceed with this special-purpose vehicle structure to lease the Nvidia Grace Blackwell chips. This would allow the tech giant to continue its AI buildout while carefully managing the appearance of its balance sheet.