From The Economist, June 22:
Entrepreneurs, exchange operators and AI firms are creating tradable instruments backed by processing power
IN 2014, AS cloud computing was taking off, a group of German technologists and financial-platform operators had an idea. They launched the Deutsche Börse Cloud Exchange, on which firms could buy and sell spare access to computing power.The effort to turn processing power into a liquid asset did not scale well, according to Randolf Roth, its chief executive and veteran of the exchange business. Standardising central processing units (CPUs), the general-purpose chips that predominated at the time, proved too difficult and integrating different types of cloud capacity too expensive. Hopes that futures and options would follow in the wake of the original launch were dashed. The venture shut down in 2016.
But Mr Roth and his partners were early to an idea whose time really may have come. Businesses around the world spent $129bn on cloud services in the first quarter of the year, estimates Synergy, a research firm, more than would be spent in a year a decade ago. Immense investment in data centres is under way. America’s five cloud “hyperscale” giants are poised to spend around $700bn on capital expenditure this year.
The hottest part of the market is not for CPUs but for the graphics-processing units (GPUs) used to train and run AI models. Some companies now spend more on artificial intelligence, and by extension on processing power, than on wages for employees. “Compute”, once a piece of techno-jargon for digital oomph, has entered common parlance. Those who sell it want to turn their assets into cashflows. Those who buy it want to hedge against sharp movements in the prices of a costly, critical input. And middlemen are racing to create financial instruments to match the two groups.
Companies that own and operate data centres certainly want to wring more out of their hardware. Some “neocloud” firms, which focus on high-end GPUs for AI, have used the value of the chips as collateral for loans. In 2024 Macquarie, an Australian investment bank, helped organise a $500m loan to Lambda, a neocloud, with the loan backed by the borrower’s valuable chips from Nvidia, which furnishes most of the world’s AI silicon. The same bank approved another GPU-backed loan to Fluidstack, another neocloud, in April last year for an undisclosed amount.
Debt backed solely by GPUs remains rare, even for neoclouds with masses of chips. Some of what looks like GPU-backed lending is actually more pedestrian. CoreWeave, the largest neocloud, runs 49 data centres. Its compute-related power capacity is one gigawatt, around the same as a medium-sized nuclear reactor. Since 2023 the company has used chips as part of the collateral for a series of loans from alternative-asset managers such as Blackstone and Magnetar Capital. These are backed by chips but also guarantees from CoreWeave’s clients with multi-year contracts for cloud capacity.
The guarantees let lenders take comfort that CoreWeave can pay back its debts while sparing them from having to think too hard about how fast its GPUs will lose their value. This funding structure is also reassuringly familiar, even if the technology is not: it is common in toll roads and other old-economy infrastructure finance.
Although such instruments serve big compute sellers well, big buyers need something different. Locking in a price with a multi-year neocloud contract insures a buyer against compute getting more expensive but not against it getting much cheaper. So as large companies the world over spend ever more on compute, they want to be able to hedge against price volatility just as they insure against changes in energy tariffs, interest rates or foreign-exchange movements—ideally in deep and liquid derivatives markets.
Two startups want to help businesses do this, by turning nascent indices tracking compute costs into a futures market. Silicon Data, founded in 2024 and backed by DRW, a trading firm, has paired up with CME Group, which operates large derivatives exchanges. Ornn, created by recent graduates of the Massachusetts Institute of Technology and run from a flat rather than an office just a few months ago, has paired up with Intercontinental Exchange, the parent company of the New York Stock Exchange, to do the same. Both aim to launch compute futures later this year, to be traded on their partner exchanges.
Each firm has its own indices tracking the hourly rental price of specific advanced chips such as the H100, Nvidia’s workhorse GPU....
....MUCH MORE
Related:
September 2025 - Felix Salmon On Turning AI Compute Into A Tradable Commodity
And then we package it, throw a pretty wrapper around the package—
perhaps a posh frock, create derivatives and hoo boy, there is money to be made!Just kidding. While Collateralized Compute Obligations are almost alliterative, a major selling point, that's not where this story is going. Yet.
February 21 - "The financialisation of AI is just beginning"
June 9 - "Big Banks Eye New AI Compute Trading Market" (plus using prediction markets)
