Broadcom Stock Is 29% Below Its Record. After Its New Anthropic Deal, I'd Consider Buying It a Little at a Time.

Broadcom (AVGO) shares have been stagnant around $342 as of the writing, trading slightly below their 2025 end point and 29% under their June 2, 2026 high of $481.57. Monday's announcement of a $63 billion financing deal with Anthropic sparked interest in the chip designer. Seven major banks - Bank of America, Blackstone, Citigroup, and Morgan Stanley - are funding a special purpose vehicle to buy Broadcom's AI chips for Anthropic. The AI lab will lease the hardware, with deliveries slated to commence in 2027.

However, Broadcom retains a portion of the risk. The SEC filing reveals their maximum liability is around $43 billion. The $63 billion financing isn't a new order, as Anthropic already had a $161.2 billion equipment lease with Broadcom. The financing modifies who pays upfront, with outside lenders covering the purchase while Anthropic handles rent over time.

CEO Hock Tan anticipates Anthropic deploying another 5 gigawatts of tensor processing units (TPUs) in 2027, marking Broadcom as their biggest custom-chip customer. Management expects AI semiconductor revenue to double to $115 billion for fiscal 2027. Broadcom is providing "residual value support" to the new vehicle, covering any gap between 72.5% of the lease owed and the hardware's sale value if Anthropic defaults. The backstop increases as racks are delivered and decreases as Anthropic pays its rent.

The June $35 billion financing required Broadcom to cover up to 85% of the debt, with a maximum liability of $29 billion. In contrast, this deal has a cap of about 68% of the $63 billion financing. However, the caps combined amount to roughly $72 billion. Anthropic could issue up to $42 billion in convertible notes to Broadcom or a partner to assist with rent payments.

Broadcom's financials are robust, with a record free cash flow of $13.7 billion in the third quarter of 2026, up from $10.3 billion in Q2 and $8.0 billion in Q1. Additionally, Anthropic has around $112.4 billion in cash and equivalents as of June 2026.

Broadcom's stock trades at approximately 18 times analysts' consensus earnings estimate for fiscal 2027, which commences next week. The S&P 500 (^GSPC) trades at about 18.7 times forward earnings. Considering Broadcom's AI chip revenue is expected to double next year, this valuation appears fair. However, it acknowledges substantial customer and financing risks.

While Broadcom now underwrites tens of billions of dollars for Anthropic's expansion, the risk per dollar is lower than in June's deal. Given the substantial investment in 2027 shipments, the deal necessitates a gradual approach to purchasing shares.