Broadcom chief steps in to secure Anthropic financing as banks waver

What happened with the Anthropic financing?

Broadcom (Nasdaq: AVGO) chief executive Hock Tan held weekend talks with bank executives to keep a large financing deal for Anthropic on track, The Wall Street Journal reported Monday. Several banks had considered pulling out.

Why it matters: Tan agreed to higher interest rates and stronger protections for lenders, according to the report. The companies announced the deal Monday. Anthropic, which makes the Claude chatbot, publicly filed for its IPO the same day. An IPO is a company's first sale of shares to the public.

How does the deal work, and what risk does Broadcom take?

The other side: A newly formed company will borrow the money to buy Broadcom's custom AI chips and networking gear. It will lease that equipment to Anthropic, whose payments help repay the loans. Deliveries begin in 2027, according to reports.

Bank of America (NYSE: BAC), Citigroup and Morgan Stanley (NYSE: MS) are arranging the senior loans, which are repaid first. Blackstone (NYSE: BX) is providing the riskier debt behind them.

Broadcom is also backing the value of the equipment for the senior lenders. That could leave it with losses if Anthropic defaults and the chips are worth less than the debt, reports said.

How did the stocks react?

Broadcom shares climbed 4.0% on Tuesday to $342.33, adding $63 billion in market value. The stock still sits 28.9% below its 52-week high.

Morgan Stanley gained 1.9% and Bank of America rose 0.3%. The tech-heavy Nasdaq-100 rose 1.3%.

Why were banks hesitant, and what comes next?

What’s next: Lenders had grown uneasy about funding AI chips as interest rates climbed and industry spending plans grew, the Journal reported. Tan flagged the issue at an Oct. 12 conference. "What I think might be the biggest constraint is capital," he said.

Other AI borrowers show strain. Morgan Stanley has reportedly struggled to sell bonds tied to a Lambda data center project, even after offering a higher yield. The cost of insuring CoreWeave debt against default reached its highest level in a year last week.

The Federal Reserve announces its next rate decision on Wednesday, Oct. 28, at 2 p.m. ET. The path of interest rates may shape how easily deals like this one get funded.