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Broadcom shares slip over $63B Anthropic financing backstop
- Broadcom shares fell Wednesday as investors weighed its guarantee on a $63 billion financing for Anthropic's AI computing equipment
tradingview.com. - Bank of America , Citi, Morgan Stanley and Blackstone will fund a vehicle leasing Broadcom gear to Anthropic starting in 2027
investors.broadcom.com. - KBRA's Andrew Giudici told Fortune that custom chips carry greater re-leasing risk than Nvidia GPUs, while Baird kept its outperform rating
fortune.com+1.
Broadcom shares fell about 1.5% in early trading on Wednesday, November 4, as investors weighed the company's exposure to the $63 billion financing that will pay for AI computing equipment for Anthropic, GuruFocus reported via TradingView. Under the deal, Broadcom is still a supplier, but it also takes on a guarantee. If Anthropic defaults on its equipment lease, Broadcom covers losses up to about $43 billion once the equipment is deployed, according to Fortune.tradingview.com+1
How the deal works
The transaction was announced on October 26. Bank of America , Blackstone , Citi Citigroup Inc. and Morgan Stanley will fund a newly formed special purpose vehicle. The vehicle will buy Broadcom XPU AI accelerators and networking gear and lease them to Anthropic, with deliveries expected to start in calendar 2027, Broadcom's release said. Bank of America, Citi and Morgan Stanley are arranging the first-lien debt, and Blackstone is the sole committed provider of the second-lien portion. Broadcom is providing "residual value support" equal to the first-lien amount.investors.broadcom.com
If Anthropic defaults, Broadcom pays the difference between 72.5% of what is still owed on the lease and the price the equipment sells for, Fortune reported. Baird kept its outperform rating on the stock. The firm said Broadcom's exposure could peak near the end of 2027 and that Broadcom will be paid a fee of a few hundred basis points for the guarantee, according to a Yahoo Finance summary of the note. Banks plan to sell as much as about $21 billion of high-grade bonds tied to the deal as soon as early next year, Bloomberg reported.fortune.com+2
Weighing the risks
The equipment is designed for a narrow set of users, which makes resale harder. "Custom TPUs generally have greater re-leasing risk than Nvidia GPUs because they are designed for a more specialized ecosystem," Andrew Giudici of credit-rating agency KBRA told Fortune. D.A. Davidson's Gil Luria described the guarantee as a competitive necessity, saying companies like Broadcom and AMD Advanced Micro Devices, Inc. "have had to step in to support their customers" to keep pace with Nvidia .fortune.com
The guarantee comes as Anthropic's IPO filing puts its spending commitments at $895.4 billion through 2045. Under a separate March agreement, Anthropic can also issue up to $42 billion in convertible notes to Broadcom to cover rent, Fortune reported. GuruFocus cautioned that faster chip replacement cycles or weaker resale prices could make the residual-value commitment more costly for Broadcom.fortune.com
Columbia Business School professor Stijn Van Nieuwerburgh pointed to a wider risk across the industry: "Separate contracts can transmit the same underlying demand shock across multiple balance sheets."
Sources (22)
- 1 Broadcom Stocks Decline 1.49% as $63 Billion AI Financing Carries Residual-Value Risk www.tradingview.com
- 2 Financial News - Broadcom Investor Relations investors.broadcom.com
- 3 Dario Amodei wants 'a country of geniuses in a data center.' Realizing that vision requires risky financial mechanics, Anthropic's IPO filing shows | Fortune fortune.com
- 4 Broadcom's $63 billion Anthropic deal draws Baird's ' ... ca.finance.yahoo.com
- 5 Banks Eye $21 Billion of Bonds for Broadcom Chip-Financing Deal uk.finance.yahoo.com
- 6 “Simply Absurd”: Why Anthropic Can’t Sell Investment-Grade Debt, as the IPO Countdown Continues finance.yahoo.com
- 7 Cramer: Broadcom's $63 Billion Anthropic Financing Works ... finance.yahoo.com
- 8 Broadcom, Nvidia, AMD now underwrite their own AI customers www.thedeepfeed.ai
- 9 Broadcom Is Backstopping Up to $43 Billion of Its Own Customer's Chips nexairi.com
- 10 Banks line up record $63 billion for Anthropic's Broadcom chips | US Brief us-brief.com
- 11 Broadcom Stock Is 29% Below Its Record. After Its New ... finance.yahoo.com
- 12 $63B SPV Will Buy Broadcom Chips and Lease Them to Anthropic fourweekmba.com
- 13 Broadcom Backs $63B Financing for Anthropic www.briefs.co
- 14 Broadcom Sinks 5.5% as Its $43 Billion Anthropic Backstop Meets an Intel-Led Chip Rout finance.yahoo.com
- 15 Broadcom's $43 billion backstop in $63 billion Anthropic chip deal hellomarvisaitoday.com
- 16 Bank of America, Blackstone, Citi and Morgan Stanley ... investors.broadcom.com
- 17 $63B SPV Will Buy Broadcom Chips and Lease Them to Anthropic - FourWeekMBA fourweekmba.com
- 18 Broadcom provides a backstop of up to $43 billion for the $63 billion AI chip financing. The "shovel sellers" are now guaranteeing the residual value of their products for buyers. After the US stock market closed on Monday, Bank of America $BAC, Blackstone $BX, Citi $C, and Morgan Stanley $MS jointly announced a $63 billion financing arrangement with a single purpose: to purchase Broadcom's $AVGO XPU accelerators and networking equipment, and then lease them to Anthropic. This is one of the largest debt transactions tied to AI infrastructure to date. Broadcom shares rose 2.33% that day to close at $329.17, edging slightly higher in after-hours trading. On the surface, this appears to be positive news, signaling that "orders are secured and funding is in place." However, I believe the most noteworthy aspect of this deal is that Broadcom's role in the structure has evolved beyond that of a mere supplier. Let's first examine the transaction structure, based on official press releases from the parties involved and Broadcom's transaction disclosures. A newly established special purpose vehicle (SPV) raised funds from banks and institutional investors to purchase Broadcom's chips and networking equipment, which will then be leased to Anthropic, with deliveries expected to begin in 2027. Bank of America, Citi, and Morgan Stanley arranged the first-lien portion, while Blackstone exclusively provided the committed capital for the second-lien portion. The key point is that Broadcom provides "residual value support" to the SPV, an amount equivalent to the first-lien portion. Broadcom's transaction disclosure clearly states that the potential liability is the difference between 72.5% of the outstanding lease amounts and the recovered value of the AI racks... www.moomoo.com
- 19 Broadcom told the SEC it could owe $43 billion if a chip ... www.sanctity.ai
- 20 Anthropic and Broadcom unveil a $63 billion equipment ... www.aidailyinsights.cn
- 21 Broadcom Guarantees Anthropic's Chip Default Risk ailately.com
- 22 Broadcom Stocks Decline 1.49% as $63 Billion AI Financing Carries Residual-Value Risk finance.yahoo.com
