Key Takeaways
- Bank of America, Citigroup, Morgan Stanley and Blackstone committed $63 billion to a vehicle that will buy Broadcom’s AI chips and networking gear and lease them to Anthropic.
- Some banks reportedly considered pulling out until Broadcom CEO Hock Tan agreed to higher interest rates and gave them more comfort on Broadcom’s guarantees.
- Broadcom’s growth plan needs more deals like this one, and its support for Anthropic’s chip financing is already well above its $24.0 billion of cash.
- At 20x forward earnings, close to its lowest in three years, Broadcom’s stock already prices in much of that financing risk.
Broadcom (AVGO) just lined up $63 billion so Anthropic can buy its chips.
On Monday, Bank of America (BAC), Citigroup (C), Morgan Stanley (MS) and Blackstone announced the structure: a new special purpose vehicle borrows the money, buys Broadcom’s AI accelerators and networking gear, and leases them to Anthropic, with deliveries starting in 2027.
It nearly didn’t happen. Some banks weighed pulling out in recent weeks, The Wall Street Journal reported, because they felt they weren’t being paid enough for the risk. Then Broadcom CEO Hock Tan held weekend talks with bank executives, agreed to higher interest rates, and gave the lenders more comfort on Broadcom’s guarantees if Anthropic defaults.
Jim Cramer’s take on X? The deal works because of Tan, which is what makes it high quality, and “There will not be others like it because there is only one Hock.”
That’s high praise for Tan, and a bit of a worry for Broadcom shareholders.
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Broadcom is still on the hook
Bank of America, Citi and Morgan Stanley are arranging the first-lien debt, and Blackstone is providing the second lien. Broadcom backs the first-lien lenders against a fall in the equipment’s value, up to the full first-lien amount, which works out to about $43.5 billion.
That’s on top of a backstop of up to about $29 billion on the first $35 billion tranche earlier this year, and up to $42 billion Broadcom may lend Anthropic directly. Broadcom had $24.0 billion of cash at the start of August.
Nor could it comfortably fund this itself. Its total debt jumped from $39.7 billion in fiscal 2023 to $68.9 billion in fiscal 2024, after it bought VMware, and was still $66.5 billion at the end of fiscal 2025.
Tan said in the deal’s announcement that it “validates that there is capital available to finance such growth.” Available, yes, at a higher rate and after a weekend of calls from the CEO.
The growth runs through two labs
Broadcom’s growth plan leans hard on customers who need this kind of help. On its September call, management’s outlines put at least 21 of the roughly 30 gigawatts it sees across fiscal 2027 and 2028 with Anthropic and OpenAI. Tan said the other four custom-chip customers can fund their own compute.
And analysts expect revenue to climb from $63.9 billion in fiscal 2025 to $174 billion in fiscal 2027 and $272 billion in fiscal 2028.
Monday’s deal shouldn’t move those estimates, since it funds deliveries Broadcom had already announced. It does show how much work it took to get them paid for.
Broadcom needs more than one of these
Cramer says there won’t be others like it, but Broadcom’s plan needs several more. It’s reportedly seeking more than $50 billion to finance custom chips for OpenAI, and Anthropic plans to add 10 gigawatts in 2028, double its 2027 build.
If every deal takes a weekend of calls and a higher rate, that caps how fast Broadcom can grow. Moody’s has said the risk to Broadcom would rise if many of these deals land in a short time.
Anthropic’s IPO filing helps. It shows $131 billion of cash and equivalents, as DA Davidson’s Gil Luria pointed out when he upgraded Broadcom to Buy from Neutral on Tuesday and raised his price target to $400 from $350. Luria expects the IPO to go through and to pave the way for OpenAI’s own next year, and says Broadcom is “trading as if the chances of that happening are near zero.”
And Broadcom does look cheap against its own history: 20x forward earnings, against a three-year average of 30x and a peak of 49x last December, and barely above the three-year low of 19x it hit on Friday.
Priced for a harder road
My take: Cramer’s right that this deal leaned on Tan. But at 20x forward earnings, with analysts expecting revenue to nearly triple by fiscal 2027, the market is already charging Broadcom plenty for that risk. I’d take that trade.
Of course, it all rides on the next deals. Watch Anthropic’s IPO, reportedly targeted for mid-November, and the size and terms of the OpenAI financing. If the next one needs even higher rates or bigger guarantees from Broadcom, “only one Hock” stops sounding like a compliment.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
