Nvidia CEO Jensen Huang speaks to the press as he leaves the Hart Senate Office Building on July 28, 2026 in Washington, DC.
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Recent Securities and Exchange Commission guidance supports the construction of debt-powered data centers to support artificial intelligence.
Technology sector ramps up creativity in search of new capital with AI chipmakers Nvidia They signed a $500 billion, partially backstopped deal with private equity firms last week to support what they call a new “asset class” of computing power.
Data center securitization has been around for years, but Nvidia’s announcement takes it to a new level and lays the groundwork for the SEC to help strengthen it, legal experts in the field told CNBC.
“People considering this transaction will be very pleased with the response from the SEC,” Orion Mountainspring, a securitization attorney at Orrick, told CNBC late last week.
Last month, the SEC reached an agreement with law firm Latham Watkins to exempt some data center debt from securitization rules that require investment sponsors to bear some of the investment risk.
“This gives us an opportunity to lower the capital required for transactions in the long term,” MountainSpring said. “That’s definitely good news for them.”
Flexible and capital efficient
BK Lee, an asset-backed security attorney at Alston & Bird, said the guidance could lead to more “flexible and capital-efficient” data center financing.
“For sponsors, it’s good in that there’s less of a structured, rigid and prescribed way of retaining risk,” he said.
The heads of the data center group at law firm Katten Muchin Rosenman said the SEC’s latest guidance avoids Dodd-Frank regulations introduced after the 2008 financial crisis, which began with securitizations of poorly underwritten mortgage loans.
Cutten’s Seth Messner said Latham “asked the SEC to tell the SEC that data center securitizations are not (asset-backed securities) and therefore not subject to the risk retention provisions under Dodd-Frank.” “The SEC basically agreed.”
It is unclear whether Nvidia has reached an agreement with KKR, apollo Messner said other financial companies are designed specifically for securitizations and other types of credit facilities, and the SEC’s guidance likely applies to those situations as well.
“If they’re planning to use securitization and they’re looking at using Nvidia computing…that seems very similar to what Mr. Latham was describing,” he said.
Staff opinions
The SEC’s guidance is a staff opinion only and does not constitute new rulemaking or legislation. Nevertheless, lawyers say the transaction law would encourage more data center financing by removing restrictions related to a specific definition of asset-backed securities, known as ABS.
“The industry will be incentivized to create innovative ways to securitize data center revenues without the severe restrictions imposed by the ABS Exchange Act,” said Alston & Bird’s Lee. Sponsors and their financial advisors should ultimately be more creative in how they structure deals, he said.
Lee added that “now that we have written guidance from the SEC,” there will be more data center securitizations that fit the legal pattern outlined in the SEC’s communications with Latham.
Data center securitizations can avoid risk retention rules in the eyes of the SEC and Latham because they are not considered “self-liquidating assets,” such as mortgages.
The SEC and multiple rating agencies declined to comment.
