Broadcom Is Backing Anthropic and OpenAI With $92 Billion. Here's What It Means for Investors.
Yahoo Finance ·
Broadcom ( AVGO +0.68% ) is making some big moves to tie itself even closer to frontier artificial intelligence (AI) labs Anthropic and OpenAI before they make their initial public offerings ( IPOs) . The chipmaker, which designs custom AI accelerators in partnership with some of the world's biggest companies, could finance up to $92 billion in chip purchases for the two companies. That number includes $42 billion of senior debt for Anthropic with guarantees from Broadcom and the residual value of its chips. There's also an $18 billion junior debt tranche planned for Anthropic without Broadcom's guarantees, but it will have to wait until Anthropic's financials are made public. Broadcom is also in talks to secure up to $50 billion in financing for OpenAI to buy its new custom XPUs. The financing is similar to Nvidia 's ( NVDA +0.42% ) $500 billion financing plan revealed earlier this year. Broadcom's fortunes are already tied to massive spending ramp-ups from both Anthropic and OpenAI; this move doubles down on the chipmaker's exposure to the frontier AI labs. Here's what it means for investors. Broadcom is the dominant force in XPUs -- custom AI accelerator chips that compete with more general-purpose graphics processing units (GPUs) for space in AI data centers. There's a lot of momentum behind XPUs, and some hyperscalers have begun multisourcing their chips, partnering with Broadcom competitors such as Marvell Technologies . Marvell expects to expand its share of the fast-growing XPU market over the next five years. Broadcom's ability to secure financing for its largest customers gives it a significant competitive advantage that could enable it to maintain its dominance in the custom AI chip market or raise prices. That's especially true with regard to its deals with Anthropic and OpenAI, as those companies aren't yet profitable, but it could also be a benefit in its dealings with hyperscalers, some of which are facing higher costs of capital as they dip into negative free-cash-flow territory.
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