Hock Tan rescued $63B Anthropic chip deal, WSJ reports

Broadcom Chief Executive Hock Tan personally stepped in to rescue what has become the largest debt deal tied to artificial intelligence, according to an exclusive report in The Wall Street Journal. The Journal reported that Tan had spent nearly two months trying to get banks to commit more than $40 billion to the financing, which will let Anthropic lease custom chips that Broadcom is building with Google. The deal was announced on Monday, October 26, and the Journal called it the biggest fundraising ever for AI infrastructure.

Banks wanted more for the risk

Over the past few weeks, some banks grew nervous about taking part in the deal, code-named "Project North Star," people familiar with the matter told the Journal, as summarized by Benzinga. Interest rates were rising and AI projects were getting harder to finance, so some lenders felt the pay did not match the risk and thought about pulling out. Tan held last-minute weekend talks with bank executives. He agreed to higher interest rates, and the banks got stronger assurances on Broadcom's guarantees against losses if Anthropic defaults, according to the report. Broadcom and the banks did not immediately respond to Benzinga's requests for comment.uk.finance.yahoo.com

How the deal works

Bank of America, Blackstone, Citi and Morgan Stanley announced the $63 billion transaction on October 26, according to the joint release. A newly formed special purpose vehicle will buy Broadcom's XPU AI accelerators and networking equipment and lease them to Anthropic, with deliveries expected to start in calendar 2027. Bank of America, Citi and Morgan Stanley are arranging the first-lien debt. Blackstone is the sole provider of the committed second-lien portion. Broadcom is providing "residual value support" equal to the first-lien amount. Under that arrangement, Broadcom covers any shortfall if the equipment's value falls below a set threshold, Chosun Ilbo explained.investors.broadcom.com+1

The financing will fund 1.7 gigawatts of compute and is part of a larger 3.5-gigawatt agreement between Broadcom and Anthropic, according to Sullivan & Cromwell, which advised Broadcom. Reuters called it one of the largest debt deals tied to the AI buildout.rmb.reuters.com+1

IPO timing and a wave of chip financing

The deal came together as Anthropic publicly filed for an initial public offering on the Nasdaq the same day. The Journal reported that Anthropic is targeting a debut the week of November 16, Benzinga noted. Anthropic's S-1 filing puts the rent on a five-year Broadcom equipment lease at about $125.2 billion, not counting interest, EconoTimes reported.econotimes.com+1

Broadcom has been backing similar arrangements. Earlier this year, Apollo and Blackstone announced a $35 billion deal to finance chips for Anthropic, with Broadcom helping protect lenders against losses. Broadcom is also reportedly trying to raise more than $50 billion to finance custom chips for OpenAI, according to the Journal's reporting. Broadcom shares rose on Monday and kept climbing in after-hours trading.uk.finance.yahoo.com