Off-Balance Sheet AI: How SPVs Are Financing the Data Center Boom While Hiding Leverage

✳️ tl;dr

Meta completed nearly $300 billion in financing through SPV structure
Building the Hyperion data center in Louisiana, setting a record for the largest private equity transaction in history 1
Hyperion data center covers 4 million square feet,
When fully operational, it will consume 5 gigawatts of electricity, equivalent to the power consumption of 4 million American households

Meta completed nearly $300 billion in financing through SPV structure
Building the Hyperion data center in Louisiana, setting a record for the largest private equity transaction in history 1
Hyperion data center covers 4 million square feet,
When fully operational, it will consume 5 gigawatts of electricity, equivalent to the power consumption of 4 million American households

Meta retains only 20% equity yet maintains full operational control,
This “control without consolidation” accounting technique keeps $270 billion in debt off the balance sheet 2
Equity accounts for only 8.5% of total financing ($2.5 billion/$29.5 billion)
Insurance companies invest heavily in such projects through private credit,
But face asset-liability mismatch risks and may be forced to liquidate investments during economic downturns 3
Historical lesson: In the 1990s, telecom companies laid 80 million miles of fiber optic cables,
Four years after the bubble burst, 85%-95% remained unused, earning the nickname “dark fiber” 4
Meta, Amazon, Google, Microsoft committed to a record $320 billion in capital expenditure this year, mostly for AI infrastructure, yet Meta’s 10-K admits: “there can be no assurance that the usage of AI will enhance our products or services” 5

Power infrastructure becomes one of the bottlenecks
Grid Strategies estimates data centers will need an additional 60 gigawatts of electricity by 2030, equivalent to Italy’s national peak demand 6
Cooling technology is also crucial: from air cooling to direct liquid cooling to immersion cooling, affecting long-term operating costs 7

Morgan Stanley serves as the exclusive underwriter, while also providing financing advisory for multiple similar projects 1
Bonds are issued in 144A format private placement, with a spread of 225 basis points above Treasury bonds 1

What can technology managers do? (1) Quantify the actual ROI timeline for AI investments (2) Assess power supply chain risks (3) Maintain appropriate financial leverage ratios