Tech & AI
Banks commit financing for Broadcom AI chips leased to Anthropic
Bank of America, Blackstone, Citigroup and Morgan Stanley committed financing for Broadcom AI chips leased to Anthropic. The deal held after Broadcom reportedly offered higher rates to keep hesitant lenders in the deal.
Quick Read
- Bank of America, Blackstone, Citigroup and Morgan Stanley committed financing for a vehicle that will buy Broadcom AI chips and lease them to Anthropic.
- Some banks weighed pulling out until Broadcom agreed to higher interest rates and firmer loss guarantees, The Wall Street Journal reported.
- Broadcom shares jumped 2.3% on Monday but remain 31.6% below their 52-week high.
- Anthropic publicly filed for an IPO on Monday and is reportedly targeting a debut the week of Nov. 16.
What did the banks agree to?
Bank of America (NYSE: BAC), Blackstone, Citigroup and Morgan Stanley (NYSE: MS) committed financing for Broadcom AI chips and networking gear meant for Anthropic, the company behind the Claude chatbot.
Why it matters: A newly formed company, known as a special purpose vehicle, will use the money to buy the gear. It will then lease the equipment to Anthropic. Deliveries are expected to begin in 2027.
Bank of America, Citigroup and Morgan Stanley are arranging the senior part of the loan, which is repaid ahead of other lenders. Blackstone alone is providing the riskier junior part. Broadcom (Nasdaq: AVGO) agreed to help protect the senior lenders if the equipment ends up worth less than expected.
Why did some lenders hesitate?
The Wall Street Journal reported that some banks grew uneasy in recent weeks about the deal, called Project North Star. With interest rates rising and AI projects harder to fund, some felt the pay did not match the risk.
Broadcom chief executive Hock Tan held last-minute weekend talks with bank executives, according to the report. He agreed to higher interest rates. The banks also got more comfort on Broadcom's guarantees against losses if Anthropic fails to pay.
How did the shares move?
Broadcom shares jumped 2.3% on Monday to $329.17, then added 1.2% in after-hours trading. The stock still sits 31.6% below its 52-week high.
Morgan Stanley rose 2.2%. Bank of America edged down 0.1%. Apollo, which financed an earlier Anthropic chip deal with Blackstone, rose 1.4%. Technology shares rose broadly, with the Nasdaq-100 up 1.1%.
What comes next?
What’s next: Anthropic publicly filed on Monday for an IPO, an initial sale of shares to the public. It plans to list on the Nasdaq under the ticker ANT. The Wall Street Journal reported it is targeting a debut the week of Nov. 16.
Rates were among the lenders' worries. The Federal Reserve announces its rate decision on Oct. 28 at 2 p.m. ET. The 10-year Treasury yield was little changed on Monday at 5.00%.
For readers
What it could mean for you: People who own Broadcom shares directly carry this deal in full. The lease could support chip sales to Anthropic once deliveries begin in 2027. But Broadcom's promises to protect lenders mean it could share losses if Anthropic fails to pay or the equipment loses value. The higher interest rates offered to keep the banks in may also make the arrangement costlier. Anthropic's planned IPO, reportedly targeted for the week of Nov. 16, could give shareholders a clearer view of the customer's finances.
Questions and answers
Who is financing Broadcom's AI chips for Anthropic?
Bank of America, Citigroup and Morgan Stanley are arranging the senior part of the financing. Blackstone is the sole provider of the riskier junior part.
How does the Broadcom and Anthropic chip deal work?
A newly formed company will use the committed money to buy Broadcom AI chips and networking gear. It will lease them to Anthropic, with deliveries expected to begin in 2027.
Why did banks nearly walk away from Project North Star?
The Wall Street Journal reported that some banks felt they were not paid enough for the risk as rates rose. Broadcom chief executive Hock Tan agreed to higher rates and offered more comfort on loss guarantees.
When is Anthropic's IPO?
Anthropic publicly filed for an IPO on Monday, seeking a Nasdaq listing under the ticker ANT. The Wall Street Journal reported it is targeting a debut the week of Nov. 16.
The numbers
| Broadcom (AVGO) price | $329.17 |
|---|---|
| Broadcom (AVGO) change | +2.33% |
| Broadcom (AVGO) market value | $1.6 trillion |
| Broadcom (AVGO) 52-week high | $481.57 |
| Apollo Global Management (APO) price | $114.37 |
| Apollo Global Management (APO) change | +1.36% |
| Apollo Global Management (APO) market value | $68 billion |
| Apollo Global Management (APO) 52-week high | $152.70 |
| Bank of America (BAC) price | $50.52 |
| Bank of America (BAC) change | −0.08% |
| Bank of America (BAC) market value | $350 billion |
| Bank of America (BAC) 52-week high | $64.81 |
| S&P 500 change | +0.70% |
| 10-year Treasury yield | 5.00% |
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