San Jose-based Lambda has raised approximately $1 billion in short-term private debt to buy more Nvidia GPUs for a massive computing deal with Microsoft, according to people familiar with the transaction. JPMorgan Chase marketed the deal to private placement investors, and Lambda expects lease revenue from its corporate customers to cover the loan through operational cash flow.
The financing, which closed this week, is the latest in a string of debt deals the San Jose neocloud provider has used to fund its rapid expansion, as reported by BiGGO Finance. Lambda operates as a neocloud provider, renting computing chips and AI infrastructure to corporate customers, and it plans to use the new debt specifically to purchase Nvidia GPUs it will then lease to Microsoft. The company has maintained a vendor relationship with Microsoft since 2018, but significantly expanded that partnership with a multibillion-dollar, multi-year agreement announced in November to deploy tens of thousands of Nvidia GPUs, including liquid-cooled GB300 NVL72 supercomputing clusters, according to Lambda.
Lambda expects to deploy the newly purchased chips quickly, and the loan arrangements are tied to designated customer deployments, meaning the debt is directly linked to specific hardware destined for specific customer contracts. The purchased chips themselves serve as collateral for the loans, per the BiGGO Finance report. Neither Microsoft nor Nvidia spokespeople responded to requests for comment on the arrangement, and Lambda spokespeople also did not respond to requests for comment.
A Company Built On San Jose’s AWS Bill Problem
Lambda’s roots go back to 2012, when twin brothers Stephen and Michael Balaban founded the company in San Jose as a facial-recognition software developer. According to Forbes, the founders originally built an internal GPU cloud simply to lower their own Amazon Web Services bills, then pivoted in 2017 to sell that GPU infrastructure to outside AI developers. That pivot has since made Lambda one of North America’s primary neocloud providers, a niche business model built around acquiring cutting-edge Nvidia chips and leasing out the compute capacity to major enterprises…