Key points
- Broadcom would lend Anthropic up to $42 billion
- The money would help pay for Broadcom-designed chips
- Anthropic flags the conflict in its own filing
Broadcom (AVGO) has agreed to lend Anthropic up to $42 billion to finance its AI infrastructure, according to Anthropic's IPO prospectus, Reuters reported on Thursday. The debt could be converted into Anthropic shares.
The loan would cover about a third of a $125.2 billion, five-year commitment Anthropic has made to lease computing capacity built on tensor processing units, the chips Google (GOOGL) designs with Broadcom. Anthropic is expected to become Broadcom's largest compute customer next year.
How would the financing work?
Anthropic would issue convertible notes, and Broadcom could designate a financing partner to take part. Anthropic said in the filing that it doesn't expect any notes to be sold before its IPO, according to Reuters.
The terms come with strings. Anthropic said it deposited cash into a restricted account for Broadcom's benefit in April and may have to add more in some circumstances. Certain payment or performance defaults could make a large part of its lease obligations due immediately, while limiting its ability to use the $42 billion facility to cover those payments.
We previously reported about $161.2 billion in Broadcom-related equipment leases, which can't be canceled except in a default. Reuters doesn't say how the $125.2 billion TPU lease relates to that total.
Why is this vendor financing?
Broadcom would help finance Anthropic's purchases of computing capacity built on chips Broadcom helped design. That makes Broadcom both a supplier and a lender to the same customer.
"Nvidia is putting in place a massive amount of its balance sheet, and Broadcom is having to follow suit," Jay Goldberg, an analyst at Seaport Research, told Reuters.
Nvidia (NVDA) has also helped finance customers' AI infrastructure. We've mapped those financial relationships around Anthropic, showing how chip suppliers also help fund the demand for their products.
"It feels that there's quite a concentrated bet right now on two companies being able to generate enough revenues to support all the financing that's happened," said Robert Leitao, managing partner of Rothschild & Co. The published remarks don't say which two companies he meant.
What does Anthropic say about the risk?
The prospectus says Broadcom's role as both hardware supplier and financing partner creates "potential conflicts of interest" that might affect Anthropic's access to computing power, according to Reuters. Anthropic also warned that Broadcom's decisions on pricing and hardware could affect its ability to get enough computing capacity.
Broadcom didn't comment, and Anthropic declined to comment, Reuters said. Broadcom has projected about $115 billion in AI semiconductor revenue in fiscal 2027 and $230 billion in fiscal 2028. Its shares were down 0.3% at $350.08 at 1:34 p.m. ET Thursday.
