Broadcom Faces Wall Street Scrutiny Over AI circular Financing
Today, Broadcom (ticker name AVGO) is being scrutinized on Wall Street for AI circular financing, just like NVIDIA, after now doing business in the same way and at such a time when data centers have such unpopularity with public opinion. It's a bit like this: if Broadcom was a lemonade stand and Anthropic was the customer buying lemonade from the stall, but now the lemonade stand lends money and gives it to the customer to buy back lemonade from the stall—apart from them not doing it with lemonade, they're doing it with computer hardware that is powering AI, what some economists are calling the fourth industrial revolution.
To most people, it does not sound right financing your own customers, and usually, if something does not sound quite right, it's not. Does that pump up stock prices higher than their true valuations and then cause further inflation from the wealth effect, where people feel richer as their portfolios have grown, making consumer confidence much more tolerant to higher prices for longer? And what about inflation from the demand for commodities from data center build-out and more hardware? Shares of Broadcom are 3% up at the time of writing. Broadcom and Anthropic's $42 Billion Financing Deal: The Latest
The Core Agreement: According to Anthropic's IPO prospectus, Broadcom has agreed to lend Anthropic up to $42 billion through a convertible note facility to finance heavy infrastructure spending.
Scale & Purpose: The massive financing arrangement covers roughly a third of Anthropic’s $125.2 billion five-year commitment to lease next-generation Tensor Processing Unit (TPU) computing capacity.
Vendor Financing & Dual Roles: The arrangement highlights a growing trend of chipmakers using their balance sheets to drive sales (following Nvidia’s playbook). However, the prospectus notes potential conflicts of interest given Broadcom's dual role as a primary hardware supplier and a major lender.
Timeline: The notes under the facility are structured to convert into Anthropic equity, with the filing confirming that no notes will be sold until after Anthropic completes its public market debut.