The SEC's clarification could simplify financing for Nvidia's data centers
A clarification from the U.S. Securities and Exchange Commission (SEC), released in July, may apply to Nvidia’s recent initiative to finance data centers. CNBC reports this, citing lawyers specializing in securitization.
Last week, AI chipmaker Nvidia entered into $500 billion in agreements, partially backed by commitments, with private equity firms to support computing capacity. Participants are calling them a new asset class. Among the financial firms mentioned in connection with the agreements are KKR and Apollo.
The SEC agreed with the position of the law firm Latham Watkins that certain data center debt obligations do not fall under the category of asset-backed securities and therefore may not be subject to requirements that transaction sponsors retain a portion of the risk. These requirements were introduced under the Dodd-Frank Act following the 2008 financial crisis.
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According to lawyers, this approach could allow transaction sponsors to gradually reduce the required equity stake and make data center financing more flexible and efficient. At the same time, it is currently unclear whether Nvidia’s agreements with KKR, Apollo, and other financial companies involve securitization or other lending mechanisms.
The SEC’s clarification reflects the views of the regulator’s staff and does not constitute a new rule or statutory provision. Experts interviewed by CNBC believe it could encourage market participants to explore new ways to securitize data center revenue without the stricter restrictions that apply to this category of securities.
