The SEC exemption cleared the path for more data-center asset-backed securities (ABS), enabling structured financing of AI data center projects without formal registration.
The Securities and Exchange Commission has cleared a significant regulatory hurdle that had constrained how data-center operators raise debt, a shift that could accelerate a wave of asset-backed securities tied to artificial intelligence infrastructure.
In a letter issued last month, the SEC's staff determined that a major subset of data-center securitizations do not need to meet disclosure and risk-retention requirements that apply to more traditional asset classes. The agency responded to a request from law firm Latham & Watkins, which had sought clarification on how data-center-backed bonds should be treated under securities regulations. The SEC concluded that such securities "are not asset-backed securities" in the traditional sense, since data centers are physical assets rather than instruments like auto loans or leases that amortize over time.
The distinction carries significant implications for advisors and investors with exposure to alternative credit and infrastructure funds. Risk-retention rules, instituted after the 2008 financial crisis, require sponsors of many asset-backed deals to retain a portion of the debt on their own books to align their interests with investors. Kevin Fingeret, a partner at Latham & Watkins, noted that compliance had required sponsors to adopt "ownership structures that weren't necessarily in line with their ultimate objectives."
Data-center asset-backed securities issuance has expanded rapidly, climbing to $15.5 billion in new issuance last year from $2.4 billion in 2020, and is on pace to set a new record in 2026. Despite the multitrillion-dollar data-center boom, this asset class remains smaller than commercial mortgage-backed securities tied to data centers, which remain unaffected by the exemption since their underlying collateral is a mortgage rather than the physical facility itself.
A Morgan Stanley research note highlighted how the surge in AI-related debt has driven meaningful widening in spreads across hyperscaler and data-center corporate credit. According to analyst Katy Huberty, global director of research, "Data-center ABS has been notably more resilient, with spreads still near year-to-date tights despite the move in corporate markets. We expect some widening if corporate spreads remain under pressure, but believe the recent credit sell-off has been driven primarily by supply technicals rather than a deterioration in data-center fundamentals."
The regulatory shift arrives as the financing infrastructure around AI computing draws in some of the largest names in asset management. Nvidia this week announced strategic partnerships with Apollo Global Management, BlackRock, Blackstone, Brookfield Asset Management, Goldman Sachs, and KKR to establish independent compute-financing platforms aimed at mobilizing more than $500 billion in third-party capital for AI infrastructure buildouts. These platforms are designed to treat compute infrastructure—and more meaningfully for Nvidia, AI chips—the way markets already treat commercial real estate or toll roads: as a bankable asset class capable of generating income.
Nvidia founder and CEO Jensen Huang stated that "this is really the first time that technology chips have become an investable asset class. These are revenue-generating assets now. They're productive, they're long-lived, they're fungible, they're flexible." BlackRock chairman and chief executive Larry Fink emphasized that the AI buildout will require unprecedented investment and a skilled workforce to transform that capital into the infrastructure powering future growth.
Huang further addressed persistent concerns about GPU obsolescence: "Fundamentally, what's different about this industry and this way of doing computing is that the computer is now part of the infrastructure, like electricity, like the internet, and so you have to think about it like it's infrastructure." Nvidia's latest joint effort with the world's largest asset managers directly counters the reputation of AI chips as rapidly deteriorating hardware.