Applied Digital asks Oracle, Meta for billions to lock in power

Applied Digital has been asking its biggest AI tenants for multi-billion-dollar parent guarantees before it will sign new data center leases, Bloomberg reported. The practice has been in place since at least last year and targets investment-grade names like Oracle and Meta, with the backstops meant to lock in power access before paperwork closes.

"With most new sites, you have to build the power and transmission lines yourself," Applied Digital president Jason Zhang told the outlet. CEO Wes Cummins said the company prefers a 70% investment-grade to 30% non-investment-grade tenant mix, and has set capacity limits on non-investment-grade firms like CoreWeave. Applied has also been seeking case-by-case guarantees from Nvidia and Advanced Micro Devices to support utility interconnections.

The backdrop is heavier than Applied Digital alone. Oracle is already carrying a $7 billion letter of credit obligation in Wisconsin after a utility there raised its credit threshold to A- at S&P and A3 at Moody's. Grid Strategies estimates data centers could pay $35 billion more in transmission charges over the next decade, and more than half of US states have moved or considered moving to make data centers carry more of the grid's costs. Bloomberg ties the November Democratic sweep to voter anger over rising electricity costs, and reports Oracle and Amazon are already being called on to backstop infrastructure.

Meta had no comment on guarantee terms. Representatives for Nvidia and AMD had no comment either.