--- title: "Google cleverly uses Wall Street financing methods to expand chip sales" type: "News" locale: "en" url: "https://longbridge.com/en/news/293909545.md" description: "Affected by massive investments in artificial intelligence, Google's capital structure has undergone significant changes, with debt rising to $98 billion. To promote its self-developed TPU chips and expand sales, Google has adopted Wall Street financial strategies, such as providing a guarantee for data center lease defaults of up to $44 billion, to attract third-party tenants to use its AI computing power. This move aims to create an alternative to NVIDIA and cover long-term revenue expectations" datetime: "2026-07-27T09:32:25.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/293909545.md) - [en](https://longbridge.com/en/news/293909545.md) - [zh-HK](https://longbridge.com/zh-HK/news/293909545.md) --- # Google cleverly uses Wall Street financing methods to expand chip sales One or two years ago, the balance sheet structure of large technology companies like Google was relatively simple, holding massive cash reserves sufficient to cover several times their debt levels. Now, influenced by substantial investments in artificial intelligence, technology companies like Google have begun to adopt various financial instruments long used on Wall Street to expand their businesses, without having to bear all the risks alone. For example, Google disclosed last week that it has reached an agreement: if a tenant defaults, Google will cover up to $44 billion of third-party data center lease payments. This guarantee has significantly increased from $6.5 billion at the end of September last year. This move aims to promote its self-developed TPU AI chips to companies like Anthropic, creating an alternative to NVIDIA's AI chips. This potential payment exposure intuitively reflects the significant changes in Alphabet's capital structure over the past year. The substantial investment in AI has forced Google to step outside its cash reserves and raise funds through multiple channels. As of June 30, the company's debt level has risen from $23.6 billion a year ago to $98 billion; at the same time, after more than twenty years, Google has once again engaged in equity financing. The necessity of fundraising was highlighted last week: Alphabet's financial report showed that for the first time since going public, the company experienced negative free cash flow and net cash consumption in the second quarter. However, the $44 billion tenant default guarantee for the data center is not included in the balance sheet and is only disclosed in the financial report notes. The balance sheet only reflects $815 million, which is Google's estimated likely payout amount. The core purpose of Google undertaking such guarantee obligations is to promote its Tensor Processing Unit (TPU) AI chips. Google Cloud itself provides server leasing equipped with TPUs and is now further deploying TPUs to third-party operated data centers to expand the chip usage scenarios. Many partners are former cryptocurrency mining companies, such as Hut 8 and TeraWulf, which have transformed to operate data centers to meet AI computing demands. Two insiders revealed that Google's internal calculations suggest that the long-term revenue from TPU sales is sufficient to cover the contingent liabilities formed by the data center lease guarantees. One of the insiders stated that management has calculated that this transaction is overall beneficial for Alphabet. Multiple insiders and corporate announcements indicate that most collaborations involve the cloud startup Fluidstack leasing and operating newly built data centers, deploying TPU computing power, and then subleasing that computing power to Anthropic. When assessing the guarantee risks, Alphabet will penetrate Fluidstack's leasing relationships to determine whether end customers face payment defaults or bankruptcy risks. A person familiar with Google's planning revealed that Alphabet has provided guarantees for about 10 projects, totaling 2.4 gigawatts of computing power in data center leases. Currently, all projects are unfinished, and the guarantee agreements have not yet officially come into effect In the data center, the TPU chip has an independent financing arrangement; in most collaborations, Broadcom, which participates in the joint design of the TPU chip, also provides guarantees. In this model, Google essentially acts as the corporate guarantor for the data center space, helping developers secure loans at lower interest rates and accelerating the construction progress of the data center. The $44 billion reported to regulators by Google is the maximum total amount payable in the future, which the financial report describes as a nominal exposure; $815 million is the company's estimated actual payout expectation. The changes in this derivative exposure measured at fair value will be accounted for in Google's current profit and loss. Alphabet's fair value assessment is based on a comprehensive forecast of default probability, timing of defaults, and recoverable amounts. Recent financial reports clearly show explosive growth in exposure. In October last year, the nominal guarantee scale was $6.5 billion, but the fair value was almost negligible; in the latest quarter, the nominal guarantee scale skyrocketed to $43.8 billion, with a book fair value reaching $815 million. Jordan Charfin, head of technology research at credit research firm CreditSights, suggests that there is no need to overly fixate on the nominal total guarantee at this stage. "The disclosed figure is the theoretical maximum loss limit, and this needs to be clarified, as there are various hedging methods to reduce actual risk." Alphabet's financial report states that once a tenant defaults, Google has multiple disposal options: it can take over all leases for its own use or transfer them to its own clients to expand scarce computing power; it can also sublease the data center to other companies. Additionally, most lease agreements have a maximum term of 15 years, and the potential payout exposure will gradually decrease over time. Google also has the right to terminate the guarantee agreement, but two informed sources indicate that termination requires a one-time payment of a high compensation fee, which is payable to the creditors who initially purchased bonds based on trust in this guarantee. This compensation will ultimately be converted into equity corresponding to the project, with the shareholding ratio depending on the compensation amount and the total project cost. The terms of Google's guarantees are not entirely consistent. Fitch Ratings documents show that the Hut 8 collaboration project stipulates that if Fluidstack defaults, Google will bear the full rent for 15 years; if there are significant construction delays, neither party has the right to waive performance obligations. In contrast, the cooperation agreements with developers like TeraWulf and Cipher include clauses for contract termination due to project delays, creating a clear distinction between the two. Hut 8 CEO Ashar Jernot stated during the signing conference call that the total amount of this data center lease contract is $7 billion, plus $2 billion for electricity, property taxes, insurance, and other expenses. The project has not yet officially commenced leasing. Google's model relies on financial engineering to build AI infrastructure, while competitors have adopted different approaches. For example, Meta has partnered as a minority shareholder to build data centers in Louisiana and Texas, with related assets remaining off-balance sheet; Oracle similarly relies on various off-balance sheet arrangements to support computing power expansion. In addition to guarantee commitments, companies like Alphabet, Meta, and Oracle have signed long-term data center lease agreements worth hundreds of billions of dollars that are not yet effective and do not need to be included in financial reports at this stage. Most leases will only officially commence after the data center is completed, chips are installed, and the data center is powered on and operational As of the end of June, the total scale of Alphabet's uninitiated lease contracts is $85.2 billion; an additional $7.6 billion is guaranteed to assist partners in securing power supply and procurement of electromechanical equipment. At the same time, Google has finalized another $24.1 billion forward guarantee plan, which will add corresponding guarantees once the terms are implemented. Of course, Google's fundamentals remain robust. Over the past 12 months, operating cash flow exceeded $185 billion; despite recent stock and bond issuances, the company still has ample refinancing space. In the event of extreme risks, Google can also proactively reduce capital expenditures. Fitch Ratings credit analyst Anubhav Arora stated that when assessing the bonds related to this batch of data center projects, Google's guarantee is the core basis for upgrading the rating to investment grade. He predicts that Google's guarantee collaborations will not slow down in the short term. "We continue to see more unrated tenants leveraging Google's guarantees to implement projects, and this trend is likely to continue." Sharing Project Upside Gains Meanwhile, Google has designed a revenue-sharing mechanism in most collaborations, allowing Google to share in the appreciation dividends if the data center developers' stock prices rise. Many guarantee transactions come with equity warrants, but not all projects have them. For example, Google holds warrants for TeraWulf, which, upon exercise, allows it to hold a 14% stake in the company; TeraWulf is building a computing power data center for Fluidstack in Buckeye, New York. Google also holds warrants for up to 5.4% of Cipher Digital, which is constructing a data center in Colorado City, Texas, under a similar collaboration model. Currently, there is only one exception: when Hut 8 announced its collaboration with Fluidstack and Anthropic last December, it did not grant Google warrants for the guarantee. 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