AI Companies Turn to Debt Financing: A New $100 Billion Trend in Tech Investment

By AiFlick News Editorial Team | Published: December 27, 2025

The landscape of AI investment is undergoing a massive transformation. According to a recent report by The New York Times, AI startups are increasingly moving away from traditional venture capital (equity) and turning toward debt financing to fund their massive infrastructure needs.

1. The Rise of the “AI Debt” Market

As AI companies like OpenAI, Anthropic, and CoreWeave require billions of dollars for Nvidia chips and data centers, they are now borrowing money instead of selling company shares.

Key Data Insights from the Report:

• Total Debt Volume: In 2025 alone, AI-related debt deals have surpassed $100 billion globally.
• GPU as Collateral: Companies are using their Nvidia H100 and Blackwell chips as collateral for loans, a practice rarely seen in the software industry before.
• Interest Rates: Despite being high-growth startups, many are securing loans with interest rates ranging from 8% to 12%, depending on their hardware assets.

2. Why Debt Over Equity?

Investors and founders are choosing debt for several strategic reasons:

• Avoiding Dilution: Founders want to keep more control of their companies without giving away huge percentages of ownership to venture capitalists.
• Infrastructure Costs: Building a single AI data center can cost over $5 billion. Debt is often a faster way to secure such massive capital.
• Investor Shift: Traditional Wall Street firms like BlackRock, Blackstone, and Goldman Sachs are now the biggest players in AI, replacing some traditional Silicon Valley VCs.

3. The Risks Involved

While this allows for rapid growth, the “AI Debt” trend comes with significant risks:

• Hardware Depreciation: If new AI chips come out faster than expected, the older chips used as collateral could lose value, leading to financial instability.
• Profitability Pressure: Unlike equity, debt must be paid back with interest. This puts immense pressure on AI companies to become profitable quickly.

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Comparative Data: AI Funding Evolution (2023-2025)

Year	VC Equity Funding	Debt Financing	Key Asset
2023	$45 Billion	$5 Billion	Software IP
2024	$60 Billion	$40 Billion	Nvidia H100 GPUs
2025	$75 Billion	$100 Billion+	Blackwell GPUs & Data Centers

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Why are AI companies borrowing money instead of taking VC investment?

Borrowing allows them to fund expensive hardware (like Nvidia GPUs) without giving up company ownership (equity).

Who are the biggest lenders in the AI space?

Major asset managers like BlackRock and specialized firms like Magnetar Capital are leading the debt financing wave.

What happens if an AI company cannot pay back the loan?

The lenders can seize the hardware (GPUs and servers) that was used as collateral for the loan.