Original author: Dong Jing

Original source: Wall Street View

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

According to the Wall Street Journal report on October 27, Broadcom CEO Hock Tan personally intervened, negotiating urgently with executives from several banks over the last weekend, ultimately finalizing a financing deal for AI chips amounting to a total of $63 billion—this is the largest debt financing for artificial intelligence infrastructure globally to date.

The deal, codenamed "Project North Star," aims to help the AI startup Anthropic lease specialized chips developed in conjunction with Google, and is disclosed in tandem with Anthropic's IPO filing. The deal is jointly led by Bank of America, Citigroup, and Morgan Stanley, with Blackstone committing $9 billion to anchor another portion of the financing.

Reports indicate that the conclusion of this deal was not smooth sailing. According to insiders, some participating banks considered withdrawing in the past few weeks due to rising interest rates and increased AI market risks, believing the compensation obtained was insufficient to cover the risks. Hock Tan then initiated "last-minute" negotiations over the weekend, agreeing to raise the loan interest rates and providing banks with stronger loss protection commitments to stabilize the situation.

Additionally, Bloomberg reported that the banks plan to issue about $21 billion in bonds to the U.S. high-grade corporate bond market as early as the first quarter of 2027, to hedge their approximately $42 billion loan exposure. This issuance plan is closely watched on Wall Street and Silicon Valley and is seen as an important barometer of investors' willingness to finance AI projects.

The largest AI financing in history: banks and private credit join hands

The "North Star" deal set another record besides its scale: for the first time, banks and private credit institutions—two types of capital that typically compete with each other—joined forces to complete such a large-scale AI infrastructure financing.

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, secured by Broadcom;
• Another approximately $18 billion in higher-risk subordinated debt, which is not secured by Broadcom, with half financed by Blackstone.

The banks plan to distribute about half of the loans they hold (approximately $22 billion) to the investment-grade bond market. According to Bloomberg, the final bond size is about $21 billion, expected to have a term of approximately five years, with principal repaid in installments during the term, and the specific issuance size and timing will depend on market conditions.

This is also the second large chip financing completed by Broadcom this year. Previously, Broadcom had completed a $35 billion deal in collaboration with Apollo Global Management and Blackstone.

Broadcom plays multiple roles: supplier, guarantor, negotiator

In the "North Star" deal, Broadcom took on an extremely rare multifaceted role.

As a chip supplier, Broadcom developed the tensor processing units (TPUs) needed by Anthropic in cooperation with Google. As a financing intermediary, Broadcom essentially provided "vendor financing"—the deal structure is that a special purpose vehicle (SPV) borrows $63 billion to purchase chips, which are then leased to Anthropic, with Anthropic's rental income being used to repay the debt.

Broadcom's key role lies in the backing of its balance sheet. According to Bloomberg, Broadcom disclosed in regulatory filings this week that its potential guarantor liability ceiling is: in the event of Anthropic's default, Broadcom must compensate for the difference between "72.5% of the unpaid lease amounts" and "the disposal value of AI rack assets." Broadcom believes the likelihood of this guarantee being triggered is low. It is this "residual value support" mechanism that allows banks to include approximately $42 billion of senior secured loans in the underwriting scope.

Hock Tan's direct involvement in the negotiations further highlights the importance of this deal to Broadcom's strategic position. According to the Wall Street Journal, he communicated individually with bank executives over the last weekend, ultimately securing commitments at the cost of raising interest rates.

Critics refer to the financing model represented by "North Star" 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 each commit to providing $42 billion and $20 billion in funding support to Anthropic. This indicates that Broadcom is both a chip seller and a financing provider, as well as a guarantor—the funds circulate in a closed loop among the parties.

"North Star" is a 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 distribution of part of the debt to investors. An Apollo spokesperson stated that the company has "completed the distribution of all 'Big Sky' debt."

AI debt market "indigestion," banks under pressure

The intense negotiations of "North Star" reflected deeper market pressures: the supply of AI-related debt has shown signs of "indigestion" in the market.

According to the Wall Street Journal, this year, hundreds of billions of dollars in AI-related bonds and loans have flooded the market, and many banks are still struggling to digest the loans they previously committed to, limiting their new lending capacity. Some banks have been forced to sell loans at discounted prices to free up capital, while others have chosen to hold them, further constricting their space for participating in new transactions.

According to Bloomberg, the scale of global AI-related financing has exceeded $455 billion this year, but asset management institutions' willingness to increase exposure to AI debt is declining.

Morgan Stanley's situation is particularly typical. According to the Wall Street Journal citing debt fund managers, Morgan Stanley is struggling to issue about $300 million in asset-backed bonds for the Kansas City data center project codenamed "Project Blitz," operated by the AI computing startup Lambda. Despite Morgan Stanley significantly increasing the bond yield by about double, there are still few buyers interested.

The trend of interest rates hangs over this deal like a sword of Damocles. According to the Wall Street Journal, banks plan to wait until next year after the chips are delivered to sell bonds to fund managers. If interest rates rise significantly by then, banks will face losses from discounted sales—as they have already committed to locking in an upper limit on loan interest rates. Some banks may choose to hold loans instead of selling at a loss.

Wall Street closely monitors next year's Q1 "large debt issuance"

The finalization of "North Star" is both a reflection of the continuous breaking of limits in AI infrastructure financing scale and a signal that this market is heading toward its limits.

For Wall Street, the issuance of about $21 billion in high-grade bonds in the first quarter of next year will be a true stress test—to examine how much appetite investors have amidst the simultaneous AI financing boom and market digestion pressure. For Broadcom, this transaction solidifies 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 points out, Broadcom plays the roles of supplier, guarantor, and negotiator in this transaction, "reflecting the intertwined nature of the high-stakes AI bets that are reshaping the economic landscape, as well as the high risks borne by all parties involved."

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