Broadcom Inc.

(NASDAQ Global Select)
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Bullish +65

Broadcom Stock Is 29% Below Its Record. After Its New Anthropic Deal, I ...

AI partnership Financial outlook New contract AI-generated analysis

πŸ“‰ Broadcom stock trades near $342, representing a 29% decline from its June record close of $481.57.

πŸ’° A consortium including Bank of America and Blackstone provides $63 billion in funding to lease Broadcom AI chips to Anthropic starting in 2027.

πŸ›‘οΈ Broadcom's maximum potential liability under the new deal is capped at approximately $43 billion, covering about 68% of the financing.

πŸ“ˆ CEO Hock Tan expects Anthropic to deploy 5 gigawatts of Broadcom TPUs in 2027, becoming the company's largest custom-chip customer.

πŸ’΅ Broadcom projects AI semiconductor revenue will double to around $115 billion for fiscal 2027.

πŸ“Š The company reported record free cash flow of $13.7 billion in the third quarter of fiscal 2026.

🏦 Anthropic holds approximately $112.4 billion in cash, providing strong liquidity to meet lease obligations.

🎯 Analysts consider Broadcom's forward P/E of 18x earnings fair given the secured revenue and growth trajectory.

Bullish Signals
  • The new $63 billion financing deal with Anthropic makes previously expected revenue more likely to come in, reducing upfront payment risk for the customer.
  • Broadcom's maximum liability under the new arrangement is capped at $43 billion, representing a lower risk-to-dollar ratio compared to its previous June deal.
  • Management expects AI semiconductor revenue to double again to approximately $115 billion for fiscal 2027 as Anthropic becomes the largest custom-chip customer.
  • The company achieved a record free cash flow of $13.7 billion in Q3 2026, demonstrating strong financial health and rising cash flows.
  • Financing for all 2027 shipments is already in place before the first racks ship, ensuring revenue certainty.
Risk Factors
  • Broadcom provides residual value support to the special purpose vehicle, with a maximum potential liability of around $43 billion if Anthropic defaults.
  • The company's future performance is heavily dependent on Anthropic successfully paying its rent and deploying the hardware as planned.
Full Analysis
Broadcom (NASDAQ:AVGO) shares are trading approximately 29% below their June record high, hovering around $342. Despite the stock's recent stagnation in 2026, a significant new financing deal with Anthropic has emerged, providing investors with renewed reasons to consider the chip designer. This agreement involves Bank of America, Blackstone, Citigroup, and Morgan Stanley supplying $63 billion to a special purpose vehicle designed to purchase and lease AI chips from Broadcom to Anthropic. The deal structure shifts payment dynamics, allowing Anthropic to pay rent over time rather than making large upfront payments, which the article suggests makes previously expected revenue more likely to materialize. However, Broadcom retains some risk by providing 'residual value support,' with a maximum potential liability pegged at around $43 billion under this specific arrangement. This represents a reduction in risk per dollar compared to a previous June deal, where Broadcom's liability was higher relative to the financing amount. Broadcom management expects Anthropic to become its largest custom-chip customer by 2027, deploying an additional 5 gigawatts of tensor processing units that year. Consequently, the company projects its AI semiconductor revenue will double again to approximately $115 billion for fiscal 2027. Analysts view Broadcom's current valuation at around 18 times forward earnings as fair, given these robust growth expectations and the fact that financing for 2027 shipments is already secured.