Broadcom CEO Secures $630 Billion in AI Infrastructure Financing

Original author: Dong Jing

Source: Wall Street Journal

A record-breaking AI infrastructure funding nearly fell through at the last minute.

According to The Wall Street Journal on October 27, Broadcom CEO Hock Tan personally led emergency negotiations with bank executives over the weekend, finalizing a $63 billion financing deal for AI chips—the largest debt financing for AI infrastructure globally to date.

The transaction, code-named "Project North Star," aims to assist AI startup Anthropic in leasing specialized chips co-developed by Broadcom and Google, with disclosure aligned with Anthropic’s IPO filing. The transaction is jointly led by Bank of America, Citigroup, and Morgan Stanley, with Blackstone committing $9 billion to anchor a separate portion of the financing.

Reports indicate that the completion of this transaction was not without challenges. According to insiders, over the past several weeks, some participating banks, citing rising interest rates and increased risks in the AI market, felt the compensation offered was insufficient to cover their exposure and considered withdrawing. Chen Fuyang promptly initiated "last-minute" negotiations over the weekend, agreeing to raise the loan interest rate and providing banks with stronger loss protection commitments, thereby stabilizing the situation.

According to Bloomberg, banks plan to issue approximately $21 billion in bonds as early as the first quarter of 2027 to hedge their roughly $42 billion loan exposure. This issuance plan is being closely watched by Wall Street and Silicon Valley as a key indicator of investor willingness to finance AI projects.

Beyond its scale, the "Polaris" transaction also set another record: banks and private credit institutions—two typically competing sources of capital—collaborated for the first time to finance an AI infrastructure project of this magnitude.

According to The Wall Street Journal, the entire $63 billion financing consists of two parts:

• Approximately $42 billion in senior secured loans, underwritten by a syndicate of banks and guaranteed by Broadcom;
• An additional $18 billion in high-risk subordinated debt, not backed by Broadcom, half of which is funded by Blackstone.

The bank plans to distribute approximately half of its loan portfolio, around $22 billion, into the investment-grade bond market. According to Bloomberg, the final bond size is expected to be around $21 billion, with a maturity of approximately five years and principal repayments scheduled to occur in installments over the life of the bond; the exact issuance size and timing will depend on market conditions.

This is the second major chip deal Broadcom has completed this year. Previously, Broadcom, in partnership with Apollo Global Management and Blackstone, closed a $35 billion transaction.

In the "Polaris" transaction, Broadcom played an exceptionally rare multifaceted role.

As a chip supplier, Broadcom collaborated with Google to develop the tensor processing units (TPUs) required by Anthropic. As a financing intermediary, Broadcom effectively provided "supplier financing"—the transaction structure involved a special-purpose vehicle (SPV) borrowing $63 billion to purchase the chips, then leasing them to Anthropic, with Anthropic’s rental income used to repay the debt.

Broadcom’s key role lies in the backing of its balance sheet. According to Bloomberg, Broadcom disclosed in its regulatory filing this week that its potential guarantee obligation is capped at the difference between "72.5% of the outstanding lease amount" and "the disposal value of the AI rack assets" in the event of Anthropic’s default. Broadcom considers the probability of this guarantee being triggered to be low. It is precisely this "residual value support" mechanism that enables banks to underwrite approximately $42 billion in senior secured loans.

Hock Tan’s direct involvement in the negotiations further underscored the strategic importance of this transaction to Broadcom. According to the Wall Street Journal, he personally communicated with bank executives over the weekend, ultimately securing commitments in exchange for higher interest rates.

Critics have referred to the financing model represented by "Polaris" as "circular financing."

In Anthropic’s IPO prospectus, the company disclosed that it expects to pay over $125.2 billion for leasing Broadcom chips, while Broadcom and Google have each committed to providing $42 billion and $20 billion in financial support to Anthropic, respectively. This means Broadcom serves as the chip seller, funding provider, and guarantor—creating a closed-loop flow of funds among the parties.

"Polaris" is the sequel to the previously codenamed "Big Sky" Anthropic-Broadcom chip financing deal. According to the Wall Street Journal, "Big Sky" was financed by Apollo, but Apollo has yet to complete the investor distribution of certain debt. An Apollo spokesperson, however, stated that the company has "completed the distribution of all 'Big Sky' debt."

The precarious nature of the "Polaris" negotiations reflects deeper market pressures: the supply of AI-related debt has already caused signs of market indigestion.

According to the Wall Street Journal, hundreds of billions of dollars in AI-related bonds and loans have entered the market this year, with many banks still struggling to absorb previously committed loans and facing limited capacity for new lending. Some banks have been forced to sell loans at a discount to free up capital, while others have chosen to hold them, further reducing space for participation in new transactions.

According to Bloomberg, global funding related to AI has exceeded $455 billion this year, but asset management firms are becoming less willing to increase their exposure to AI-related debt.

Morgan Stanley’s situation is particularly emblematic. According to the Wall Street Journal, citing debt fund managers, Morgan Stanley is struggling to issue approximately $300 million in asset-backed bonds for the Kansas City data center project known as "Project Blitz," operated by AI computing startup Lambda. Despite significantly increasing the bond yield by roughly double, there has been little interest from buyers.

Interest rate trends are another sword of Damocles hanging over this transaction. According to the Wall Street Journal, banks plan to wait until next year’s chip deliveries before selling bonds to fund managers. If interest rates rise significantly by then, banks could face losses from selling at a discount—because they have committed to capping loan interest rates. Some banks may choose to hold onto the loans rather than sell them at a loss.

The final implementation of "Polaris" is both a reflection of the continuous breakthroughs in AI infrastructure funding and a signal that this market is approaching its limits.

For Wall Street, the issuance of approximately $21 billion in high-grade bonds in the first quarter of next year will be a real stress test—revealing how much appetite investors still have amid the AI funding boom and market absorption pressures. For Broadcom, this transaction reinforces its indispensable hub position in the AI supply chain, but also means its balance sheet is increasingly tied to Anthropic’s fate.

As the Wall Street Journal noted, Broadcom’s role as supplier, guarantor, and negotiator in this deal “reflects the interconnected nature of the massive AI bets reshaping the economic landscape and the high stakes borne by all parties involved.”