Broadcom wins $455 target as $100 billion AI chip financing looms

Broadcom's plan to raise as much as $100 billion in debt to finance AI chips for Anthropic drew a $455 price target from BMO, which called it the No. 2 AI chip supplier after Nvidia.

"Broadcom is the leading AI supplier in custom ASICs and networking, and the second-largest AI chip company after Nvidia," Harsh Kumar, an analyst at BMO Capital Markets, said in initiating coverage with an Outperform rating.

The financing, first reported by Bloomberg, would see Broadcom guarantee part of a senior-secured tranche of $60 billion to $70 billion, with an additional $30 billion in subordinated debt. Blackstone and Apollo, which joined Broadcom in June to set up the AI XPV Platform, are in talks to participate. The structure mirrors the $35 billion deal the three firms closed in the spring, in which a special-purpose vehicle bought Google TPUs and leased them to Anthropic, with Broadcom backstopping the senior notes.

The package would be the largest SPV financing ever funded, and it comes as Anthropic has stacked roughly $71 billion in chip-lease debt in 60 days, none of it on its balance sheet. Broadcom shares closed up 0.43 percent at $364.03 after Bloomberg reported the talks, implying about 25 percent upside to BMO's target.

How the financing works

The AI XPV Platform, organized by Morgan Stanley, borrows through a special-purpose vehicle, takes an equity check, buys custom chips and leases them to AI companies. Lease payments service the debt, which sits inside the SPV rather than on the customer's balance sheet. Broadcom's guarantee of the senior notes put those tranches in line with its investment-grade profile, lowering borrowing costs.

Broadcom has agreed to cover customer lease payments for five years if a client defaults, up to $29 billion of exposure on the first deal alone, according to Bank of America. The bank sized the financing vehicle behind Broadcom's AI chip boom at potentially $370 billion of senior debt by 2029, including roughly $150 billion of new issuance in 2027. The numbers under discussion would make the new package the largest SPV deal ever funded, roughly triple the size of the June transaction.

The financing is part of a broader wave of AI-related borrowing. About $500 billion of AI-linked debt has been issued in the US investment-grade market so far this year, with hyperscalers Amazon, Alphabet, Microsoft, Meta and Oracle accounting for roughly 40 percent of the total, according to market data cited by analysts. AI-related debt now makes up about 18 percent of total US investment-grade issuance, up from 7 percent in 2025.

The circularity question

The arrangement concentrates risk in a loop: Google supplies the TPUs, was an early equity backer of Anthropic, and now stands behind the financing that pays for its own hardware. Anthropic leases the chips. Investors put up the cash. The chip vendor, the equity holder and the financing guarantor are, to a meaningful degree, the same cluster of firms.

The structure echoes the telecom build-out at the turn of the century, when equipment makers lent customers the money to buy their equipment, a practice that flattered demand until customers could not pay and vendors wore the losses. The AI version is better collateralized, with guarantees layered in to protect senior lenders, but the underlying mechanic is the same. Anthropic already owes xAI about $1.25 billion a month through 2029 for one Memphis data center, and this is its third enormous compute deal in three months.

Investor takeaway

Broadcom shares, up 5.2 percent year-to-date, trade well below BMO's $455 target, which implies roughly 25 percent upside from the $364.03 close. The financing deal, if finalized, would cement Broadcom's position as the leading financier of AI compute, challenging Nvidia's dominance in the data center chip market. But the CDS market has already started to price the risk: Broadcom's credit default swaps spiked as it competes for Google's TPU business, and the monster debt deal will likely feed down to the CDS of other chip and hyperscaler credits. For investors, the question is whether the revenue growth justifies the leverage building up across the AI supply chain.

This article is for informational purposes only and does not constitute investment advice.