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 27th, Broadcom's Broadcom CEO Chen Fuyang ( Hock Tan ) personally took charge and held urgent negotiations with several bank executives over the last weekend, ultimately concluding a chip financing deal worth a total of $63 billion – this is the largest artificial intelligence infrastructure debt financing deal of its kind to date globally.

The transaction code “Polaris” ( Project North Star ) is aimed at assisting the startup Anthropic of AI in leasing a dedicated chip jointly developed by Broadcom and Google, and will be disclosed in sync with the declaration of IPO from Anthropic. The transaction is co-led by Bank of America, Citigroup, and Morgan Stanley, with Blackstone ( Blackstone ) committing to provide $9 billion to anchor another portion of the financing.

The report indicates that the completion of this transaction was not smooth sailing. According to people familiar with the matter, in the past few weeks, some of the participating banks, due to rising interest rates and increased AI market risks, felt that the compensation they received was not sufficient to cover those risks and considered withdrawing from the deal at one point. Chen Fuyang then initiated "last-minute" negotiations over the weekend, agreeing to raise the loan interest rates and providing the banks with more substantial guarantees for potential losses, which finally stabilized the situation.

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

The largest AI financing in history: A rare alliance between banks and private credit providers

In addition to its scale, the “Polaris” transaction set another record: for the first time, banks and private credit institutions—two types of capital forces that usually compete with each other—joined forces to complete such a large-scale AI infrastructure financing deal.

According to The Wall Street Journal, the total $63 billion in financing consists of two parts:

• Approximately $42 billion in senior secured loans, underwritten by a bank consortium, with Broadcom providing the guarantee and endorsement;
• In addition, there is approximately $18 billion in subordinated debt with a higher risk level that does not enjoy Broadcom's guarantee, of which half is funded by Blackstone.

The bank plans to distribute about half of its loan portfolio (approximately $22 billion) into the investment-grade bond market. According to Bloomberg, the final bond issuance will amount to around $21 billion, with an expected maturity of about five years. The principal will be repaid in installments over the duration of the bond. The specific issuance size and timing will depend on market conditions.

This is also Broadcom's second major chip financing deal of the year. Previously, Broadcom had completed a $35 billion transaction in collaboration with Apollo Global Management ( Apollo Global Management ) and Blackstone.

Broadcom in Multiple Roles: Supplier, Guarantor, Negotiator

In the "Polaris" transaction, Broadcom played an extremely rare multiple role.

As a chip supplier, Broadcom jointly developed the tensor processing units ( TPU ) required for Anthropic with Google. In its role as a financing intermediary, Broadcom essentially provided "supplier financing" – the transaction structure was as follows: a special purpose company ( SPV ) borrowed $63 billion to purchase the chips, which were then leased to Anthropic; the rental income from Anthropic was used to repay the debt.

The key role of Broadcom lies in the endorsement of its balance sheet. According to Bloomberg, Broadcom disclosed in its regulatory documents this week that the upper limit of its potential guarantee liability is as follows: in the event of a breach by Anthropic, Broadcom must make up for the difference between “72.5% of the outstanding lease amount” and “the disposal value of AI rack assets.” Broadcom believes that the probability of this guarantee being triggered is low. It is this “residual value support” mechanism that has allowed banks to include approximately $42 billion in senior secured loans within their underwriting scope.

Hock Tan's direct involvement in the negotiations further highlights the strategic importance of this deal to Broadcom. According to The Wall Street Journal, he communicated with bank executives one by one over the last weekend, ultimately securing their commitments in exchange for an increase in interest rates.

Critics refer to the financing model represented by "Polaris" as "revolving financing" ( circular financing ).

In the prospectus of IPO, Anthropic disclosed that it expects to spend over $125.2 billion on leasing Broadcom chips, while Broadcom and Google have committed to providing $42 billion and $20 billion in financial support to Anthropic respectively. This means that Broadcom is both the chip seller and the financing provider, as well as the guarantor – creating a closed-loop flow of funds among all parties.

"Polaris" is a continuation of the Anthropic - Broadcom chip financing deal, which was previously codenamed "Great Sky" (Big Sky). According to The Wall Street Journal, "Great Sky" was financed by Apollo, but Apollo has yet to complete the distribution of some of the debt to investors. An Apollo spokesperson stated that the company has "completed the distribution of all of 'Great Sky's' debt."

AI Debt market "indigestion," banks under pressure

The "Polaris" negotiations have been fraught with dangers, reflecting deeper market pressures: The supply of AI related debt has already shown signs of causing "indigestion" in the market.

According to The Wall Street Journal, since the beginning of this year, trillions of dollars worth of AI-related bonds and loans have flooded the market. Many banks are still struggling to digest the loans they had previously committed to, and their capacity to take on new loans is limited. Some banks have been forced to sell these loans at a discount to free up capital, while others choose to hold onto them, further reducing their ability to participate in new transactions.

According to Bloomberg, since the beginning of this year, the global financing related to AI has exceeded $455 billion, but the willingness of asset management institutions to continue increasing their exposure to AI debt is waning.

Morgan Stanley's situation is particularly typical. According to The Wall Street Journal, quoting debt fund managers, Morgan Stanley is trying to issue about $300 million in asset-backed bonds for a data center project in Kansas City codenamed “Project Blitz”, which is operated by the Lambda computing startup AI. Despite Morgan Stanley having significantly doubled the bond yield, there are still few buyers interested.

Interest rate trends represent another Sword of Damocles hanging over this transaction. According to The Wall Street Journal, banks plan to sell the bonds to fund managers after the chips are delivered next year. If interest rates rise significantly by then, banks will face losses from selling at a discount, as they have committed to locking in the upper limit of loan interest rates. Some banks may choose to hold onto the loans rather than selling them at a loss.

Wall Street is closely watching next year's Q1 "huge debt issuance"

The final implementation of "Polaris" is not only a microcosm of the continuous breakthroughs in the financing scale of AI's infrastructure, but also a signal that this market is approaching its limits.

For Wall Street, the issuance of approximately $21 billion in high-grade bonds in the first quarter of next year will be a real stress test – to see how much appetite investors still have amidst the AI financing boom and the market's pressure to absorb it. For Broadcom, this transaction solidifies its "indispensable" hub position in the AI supply chain, but it also means that its balance sheet is increasingly closely tied to the fate of Anthropic.

As pointed out by The Wall Street Journal, Broadcom played the roles of supplier, guarantor, and negotiator in this transaction, "reflecting the interwoven nature of the large bets that are reshaping the economic landscape, as well as the high risks undertaken by all parties involved."