Broadcom's newest debt deal: Here's what to know

Summary

CNBC's Kristina Partsinevelos reports on how major chipmakers are financing the AI boom with off-balance-sheet debt. Broadcom is in talks to raise more than $60 billion, possibly up to $100 billion, through an SPV to buy AI chips and lease them to customers like Anthropic, while Broadcom guarantees part of the debt and chip value. Nvidia is pursuing a similar but larger program, backstopping a smaller percentage of deals. The setup works while GPU compute is scarce, but the report flags the risk if the industry overbuilds.

• Broadcom plans to fund AI chip deals largely off its own balance sheet.
• The debt package could reach $60 billion to $100 billion through an SPV.
• Broadcom would guarantee part of the debt and chip value if customers cannot pay.
• Bank of America sees exposure possibly reaching $370 billion by 2029 but calls losses manageable.
• Nvidia is pursuing a similar program targeting more than $500 billion but backstopping up to only 25% of deals.
• Meta pioneered the off-books data center financing approach with Blue Owl.
• The financing model works while AI compute is scarce, but overbuilding is a key risk.