Amazon locks up $8 billion in backup generators to keep AI data centers running

Amazon and Generac Holdings signed a long-term supply agreement on September 16 under which Generac will provide backup power generators for Amazon's data centers, with payments that could total up to $8 billion over the life of the deal. As part of the arrangement, Generac issued Amazon warrants to purchase up to 1,693,745 shares of common stock at $200.93 each — a stake potentially worth $340 million. Generac shares jumped more than 40% in after-hours trading following the announcement.

The warrant structure mirrors deals tech giants have increasingly used with critical suppliers: roughly 308,000 warrant shares vested immediately upon signing, with the remainder unlocking in tranches tied to how much Amazon and its affiliates actually pay Generac for generators. Full vesting requires $8 billion in cumulative payments, and the warrants remain exercisable through September 2033 — giving Amazon nearly a decade of optionality tied to how much backup power capacity it ultimately buys.

Initial deliveries under the supply agreement are expected to total $2.4 billion across 2027 and 2028, suggesting Amazon has committed to a multi-year generator rollout well beyond a single data center campus. Generac, based in Waukesha, Wisconsin, had a market capitalization of roughly $10.3 billion before the announcement; the stock surge effectively priced in a substantial chunk of the deal's maximum value overnight.

The deal underscores a shift in what actually constrains AI data center buildouts. GPU supply has dominated headlines for two years, but grid interconnection queues in many U.S. regions now stretch three to five years, and utilities are increasingly unable to guarantee power delivery on the timeline hyperscalers need. Backup and on-site generation — traditionally a redundancy measure for outages — is increasingly being deployed as primary or bridge capacity while utility-scale power comes online, which explains why a generator manufacturer just became a strategic Amazon supplier on par with its chip and networking vendors.

The arrangement follows a pattern set by other tech-energy warrant deals this year, where hyperscalers trade equity upside for guaranteed capacity and favorable pricing from suppliers whose production they need to lock in years in advance. For Generac, the deal resets its growth narrative from a residential and commercial backup power company toward a data center infrastructure supplier, a pivot that markets rewarded immediately and heavily.