Broadcom's $63B Anthropic Deal: A Safer Bet, But Not Risk-Free

Broadcom (AVGO) stock has been stuck in neutral this year, trading around $342, roughly 29% below its June record high of $481.57. But on Monday, investors got a fresh reason to pay attention: a consortium of banks including Bank of America, Blackstone, Citigroup, and Morgan Stanley agreed to provide $63 billion in funding to a special purpose vehicle that will purchase Broadcom's AI chips for Anthropic. The vehicle will lease the hardware to the AI lab, with deliveries starting in 2027.

This isn't a new order. The chips fall under an existing compute agreement between Broadcom and Anthropic. Anthropic's IPO filing reveals that its five-year equipment leases with Broadcom already call for about $161.2 billion in rent, excluding interest. What the new financing does is shift the upfront burden: outside lenders fund the purchase, and Anthropic pays rent over time instead of handing over tens of billions before the racks arrive.

However, Broadcom is not off the hook entirely. An SEC filing on Tuesday shows Broadcom's maximum potential liability under the deal is around $43 billion. The company is providing 'residual value support'—if Anthropic defaults, Broadcom covers the gap between 72.5% of what's still owed and what the equipment fetches when sold. This backstop rises as racks are delivered and falls as Anthropic pays rent.

Compared to June's $35 billion financing for a 1-gigawatt deployment, where Broadcom's maximum liability was about 83% of the financing, this deal caps Broadcom's exposure at roughly 68% of the $63 billion. Still, the two deals together add up to about $72 billion in potential liability. Broadcom's CFO called these 'modest residual value guarantees,' but $72 billion is hardly modest.

On the bright side, Broadcom generates plenty of cash. Free cash flow hit a record $13.7 billion in fiscal Q3 2026, up 95% year-over-year. And Anthropic had about $112.4 billion in cash and equivalents at the end of June, according to its IPO filing. So the risk, while large, is backed by substantial resources.

The financing makes it easier for Anthropic to pay for the chips Broadcom is already counting on. On the September 2 earnings call, CEO Hock Tan said he expects Anthropic to deploy another 5 gigawatts of tensor processing units (TPUs) in 2027 and become Broadcom's largest custom-chip customer that year. Management projects AI semiconductor revenue to double again to around $115 billion in fiscal 2027.

By securing outside financing, Broadcom reduces the risk that Anthropic's orders get delayed or canceled due to cash constraints. This increases the likelihood that Broadcom's revenue projections materialize. The deal also demonstrates Broadcom's ability to structure complex financing arrangements to support its customers' growth, which could be a template for future deals.

However, the deal also highlights Broadcom's concentration risk. The company is increasingly reliant on a single AI lab for a significant portion of its future growth. If Anthropic faces financial difficulties, Broadcom could be on the hook for tens of billions while simultaneously losing revenue. That's a double whammy that investors need to consider.

Valuation-wise, Broadcom trades at about 18 times analysts' consensus earnings estimate for fiscal 2027, roughly in line with the S&P 500's 18.7 times forward earnings. For a company expecting its AI chip revenue to double next year, that seems fair. The stock's 29% decline from its record high suggests that much of the customer and financing risk is already priced in.

Still, the market may be underestimating the potential downside if Anthropic's business doesn't scale as expected. The $72 billion in combined backstops is a lot for a company with a market cap of around $1.6 trillion. But Broadcom's strong cash flow and Anthropic's substantial cash reserves provide a cushion. Overall, the deal is a net positive for Broadcom, but it doesn't eliminate the risks.