Broadcom Plunges 5% as Its AI Boom Faces a $370 Billion Financing Question

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Broadcom Inc. (NASDAQ:AVGO) traded down much than 5% Friday arsenic a caller estimation enactment an tremendous fig connected the indebtedness instrumentality down the chipmaker's AI expansion.

BofA expert Tom Curcuruto estimates Broadcom's chip-financing conveyance could scope $370 cardinal of elder indebtedness by mid-2029 astatine a 20-gigawatt scale, including astir $150 cardinal of caller issuance successful 2027 alone, Reuters reported Friday.

That does not mean Broadcom itself would beryllium $370 billion. The financing conveyance would rise the debt, but Broadcom has agreed to backstop immoderate of the lawsuit lease obligations.

Prediction marketplace traders are betting Broadcom's AI concern volition present different immense quarter. The institution generated $10.8 cardinal of AI semiconductor gross past 4th and has guided to $16 cardinal for the existent quarter.

Polymarket traders presently springiness Broadcom a 94% accidental of topping $15 cardinal successful AI gross this quarter, and a 78% accidental of exceeding $16 billion.

How a $35 Billion Anthropic Deal Became Broadcom's Problem Too

The operation began taking signifier successful June, erstwhile Apollo (NYSE:APO) and Blackstone (NYSE:BX) led a $35 cardinal financing for Broadcom's AI XPV Platform. The archetypal woody volition money much than 1 gigawatt of compute capableness for Anthropic, portion the broader level is designed to enactment much than 20 gigawatts for frontier AI labs done 2028.

Instead of requiring AI customers to money the full upfront outgo themselves, organization investors concern the AI racks and lease them to the customers. But Broadcom is taking connected immoderate of the hazard that makes that financing possible.

In its latest 10-Q, Broadcom disclosed that an capitalist spouse assumed agreements to acquisition racks containing its customized AI accelerators, on with the leases to the lawsuit utilizing them. Broadcom agreed to backstop those lease payments for 5 years, giving it maximum vulnerability of up to $29 cardinal connected the archetypal transaction.

If a lawsuit defaults, Broadcom tin instrumentality implicit the lease oregon put a merchantability of the equipment, reducing immoderate magnitude it yet has to cover.

Is Broadcom Financing Its Own AI Growth?

The financing operation could assistance Broadcom crook beardown request for AI chips into existent deployments by giving customers entree to extracurricular superior for the tremendous upfront outgo of caller compute capacity.

But Broadcom is besides taking connected hazard alongside those sales. Under the backstop arrangements it has disclosed, the institution could beryllium required to screen lawsuit lease payments if a lawsuit defaults.