Unmasking the Credit Arbitrage in AI Infrastructure Financing: The unaccounted embedded put option

To understand the economics of the exploding market for AI "Neocloud'' financing, one must look past the ``Cloud'' label and view the transaction strictly as a financial instrument. I argue that the debt issued by these Neocloud SPVs is best understood as a Structured Note with an embedded derivative - specifically, a put option sold by the GPU manufacturer. Critically, the mark-to-market value of this put option is neither valued nor recorded, yet it provides the essential credit enhancement that keeps the lending wheel spinning. Within the private deal structure, the "buyer of last resort'' mechanism functions as an unvalued put option sold by the manufacturer, where the premium received is either zero or incorporated indistinguishably into the hardware price. This paper deconstructs this credit arbitrage, concluding that the current ecosystem is sustained by a market structure that effectively does not quantify either the risk in the put option or ascribe an economic value to it.