This deal to lease chips for Anthropic nearly fell through due to the AI debt market's "indigestion." Broadcom CEO Hock Tan urgently brokered a rare partnership between banks and Blackstone, at the cost of "raising interest rates plus a residual value guarantee." With Broadcom serving as both seller and guarantor, this controversial "circular financing" loop has tightly bound it to Anthropic. The issuance of roughly $21 billion in high-grade bonds in the first quarter of next year will serve as a real‑world stress test.
A record-breaking AI infrastructure financing deal nearly fell through at the last minute.
According to a report by The Wall Street Journal on October 27,$Broadcom (AVGO.US)$CEO Hock Tan personally stepped in, holding emergency talks with executives from several banks over the final weekend and ultimately sealing an AI chip financing deal totaling as much as $63 billion—by far the largest artificial intelligence infrastructure debt financing in the world to date.
The deal, codenamed "Project North Star," is designed to support AI startups.$Anthropic (ANT.US)$Renting$Broadcom (AVGO.US)$and$Alphabet-C (GOOG.US)$A jointly developed custom chip, disclosed in tandem with Anthropic's IPO filing. The transaction was conducted by…$Bank of America (BAC.US)$、$Citigroup (C.US)$and$Morgan Stanley (MS.US)$Jointly led,$Blackstone (BX.US)$It has pledged to invest US$9 billion to secure another tranche of financing.
According to reports, the deal did not go smoothly. Sources familiar with the matter said that, over the past few weeks, some participating banks, citing rising interest rates and heightened risks in the AI market, concluded that the compensation they were receiving fell short of covering those risks and even considered pulling out. In response, Chen Fuyang promptly initiated "last‑minute" negotiations over the weekend, agreeing to raise loan interest rates and provide banks with stronger guarantees against potential losses, thereby stabilizing the situation.
Additionally, according to Bloomberg, the bank plans to issue roughly $21 billion in bonds in the U.S. high-grade corporate bond market as early as the first quarter of 2027, aiming to hedge its approximately $42 billion in loan exposure. This issuance is being closely watched by Wall Street and Silicon Valley and is seen as a key indicator of investor appetite for financing AI‑related projects.
The Largest AI Funding Round in History: Banks and Private Credit Firms Unite in an Unprecedented Partnership
Beyond its sheer scale, the "Polaris" deal set another record: for the first time, banks and private‑equity credit firms—two capital players that typically compete with one another—joined forces to finance an AI infrastructure project of this magnitude.
According to the Wall Street Journal, the entire $63 billion financing consists of two components:
Approximately US$42 billion in senior secured loans, underwritten by a banking syndicate and guaranteed by Broadcom;
In addition, approximately $18 billion in higher-risk subordinated debt, which is not backed by Broadcom's guarantee, is half-funded by Blackstone.
The bank plans to securitize roughly half of its loan portfolio—about $22 billion—and place it in the investment-grade bond market. According to Bloomberg, the final bond issuance is expected to total approximately $21 billion, with a maturity of around five years and principal repayments scheduled on a graduated basis over the life of the securities. The exact size and timing of the offering will depend on market conditions.
This is also$Broadcom (AVGO.US)$This is the second major chip financing deal completed this year. Previously, Broadcom had joined forces with$Apollo Global Management (APO.US)$and$Blackstone (BX.US)$A $35 billion deal has been completed.
Broadcom "wears many hats": supplier, guarantor, negotiator
In the "Polaris" transaction,$Broadcom (AVGO.US)$Played an extremely rare multiplicity of roles.
As a chip supplier, Broadcom collaborated with Google to develop the tensor processing unit (TPU) required by Anthropic. As a financing intermediary, Broadcom effectively provided "supplier financing"—the transaction structure is as follows: a special-purpose vehicle (SPV) borrows $63 billion to purchase the chips and then leases them to Anthropic, with Anthropic's rental income used to repay the debt.
Broadcom's key role lies in the endorsement of its balance sheet. According to Bloomberg, Broadcom disclosed in regulatory filings this week that its potential liability under the guarantee is capped at covering the difference between "72.5% of the outstanding lease payments" and the "disposal value of the AI rack assets" in the event of Anthropic's default. Broadcom believes the likelihood of this guarantee being triggered is low. It is precisely this "residual value support" mechanism that enabled banks to include approximately $42 billion in senior secured loans within their underwriting scope.
Hock Tan's direct involvement in the negotiations further underscores the strategic importance of this deal to Broadcom. According to the Wall Street Journal, he spent the final weekend meeting individually with bank executives, ultimately securing commitments from all parties at the cost of raising interest rates.
Critics refer to the financing model embodied 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 pledged to provide Anthropic with $42 billion and $20 billion in funding, respectively. This means that Broadcom is both a chip seller and a financier, as well as a guarantor—creating a closed-loop flow of funds among all parties.
"Polaris" is the follow-up to Anthropic-Broadcom's chip financing deal, which was previously codenamed "Big Sky." According to the Wall Street Journal, "Big Sky" was financed by Apollo, but Apollo has yet to complete the distribution of some of the debt to investors. An Apollo spokesperson, however, stated that the company has "completed the distribution of all 'Big Sky' debt."
The AI-driven debt market is "indigesting," putting pressure on banks.
The fraught negotiations over the "North Star" project underscore deeper market pressures: AI‑related debt issuance has already begun to show signs of "indigestion" in the market.
According to the Wall Street Journal, since the beginning of this year, hundreds of billions of dollars in AI‑related bonds and loans have flooded the market. Many banks are still struggling to digest previously committed loans, leaving them with limited capacity to extend new credit. Some banks have been forced to sell loans at a discount to free up capital, while others are choosing to hold onto them, further narrowing their room to participate in new deals.
According to Bloomberg, global AI-related financing has exceeded $455 billion so far this year, yet asset management firms are growing less willing to continue expanding 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 attempting to issue roughly $300 million in asset-backed bonds for its Kansas City data center project, codenamed "Project Blitz," which is operated by the AI computing startup Lambda. Despite Morgan Stanley having nearly doubled the bond yields, there has been scant interest from buyers.
Interest-rate trends represent another Damoclean sword hanging over this transaction. According to the Wall Street Journal, banks plan to wait until next year's chip deliveries before selling the bonds to fund managers. Should interest rates rise sharply by then, the banks would incur losses from having to sell at a discount—since they have already committed to capping loan rates. Some banks may choose to hold onto the loans rather than sell them at a loss.
Wall Street is closely watching the "massive bond issuance" in Q1 next year.
The successful completion of the "North Star" project is both a microcosm of the AI infrastructure financing market repeatedly breaking new records and a signal that this market is approaching its limits.
For Wall Street, the issuance of roughly $21 billion in high-grade bonds in the first quarter of next year will serve as a real‑world stress test—assessing just how much appetite investors still have amid the AI financing boom and mounting market‑wide pressure. For Broadcom, this deal reinforces its position as an "indispensable" hub in the AI supply chain, but it also means its balance sheet is becoming increasingly intertwined with Anthropic's fate.
As the Wall Street Journal has pointed out,$Broadcom (AVGO.US)$In this deal, the same entity assumes the roles of supplier, guarantor, and negotiator, "reflecting the intertwined nature of the high-stakes AI bets that are reshaping the economic landscape, as well as the substantial risks borne by all parties involved."
Edited by melody