ISSUE 014 · The Aroko Letter

The Guarantee Gap

Nvidia, AMD, and Anthropic are financing the AI buildout with guarantees and warrants instead of cash, and the public still can't price what those promises would cost if called.

SEP 03, 202612 min readPrimary-source verified

AI INFRASTRUCTURECAPITAL & FINANCE

In August Nvidia agreed to guarantee up to $105 billion in lease and power payments for a single Ohio data-center campus. It is not an investment but a capped residual-value guarantee, and Nvidia has disclosed neither the default probability, recovery value, nor discount rate behind its "not significant" fair-value conclusion. This issue walks five financing structures that landed in four months (guarantees, warrants, project vehicles, compute offtakes) and asks who is supposed to price any of them, reads Britain's Railway Mania as the closer precedent than the dot-com bust, and forecasts that the gap between disclosed ceilings and estimable expected loss widens through 2027.

Anchor figure

Nvidia's $105 billion capped residual-value guarantee carries no disclosed default probability, recovery value, or discount rate: the ceiling is public, the loss curve is not.

Key takeaways

Gross disclosed contractual commitments and maximum contingent support across the seven biggest AI companies rose from roughly $575 billion at end-2024 to about $3.2 trillion by mid-2026 (KBRA), a measure of promise size, not of what the promises would cost if called.
Guarantees and warrants are not the same instrument: a guarantee triggers when a project goes south and needs a credit model, a warrant triggers when things go well and needs option pricing. What is missing publicly is not the method but the deal-level inputs and a cross-issuer framework.
The closer precedent is Britain's Railway Mania, where capital hit roughly 7 percent of national income in 1847; the difference today is that the guarantor, the equipment seller, and the equity beneficiary are frequently the same handful of companies, cross-collateralized against each other.
Forecast: the guarantee gap widens, not narrows, through end-2027. It breaks if a named rating agency or systemic-risk regulator publishes a generalizable expected-loss methodology applied to at least two issuers, or if most of the next major tracked deals shift to transparently priced structures.

Where it sits in the series

Moves the Grid-Silicon Order from the physical stack to the financing layer beneath it: the guarantees and warrants funding the buildout are as load-bearing, and as unpriced, as the equipment they pay for.

READ THE FULL ISSUE Published in full, free, on Beehiiv.