Key Takeaways
Apollo Global Management Inc. and Blackstone Inc. are in discussions to provide Broadcom Inc. with around $35 billion in financing, a deal that would rank among the largest private credit transactions in history and fund the chipmaker’s expansion in artificial intelligence. Broadcom’s stock rose 3.75 percent on the news.
Blackstone’s Chief Executive Officer Steve Schwarzman said on an earnings call last month that the firm's global data center portfolio has surpassed $150 billion, including projects under construction, with another $160 billion in potential projects in the pipeline. Blackstone has identified AI infrastructure as a core investment theme since its 2021 acquisition of data center developer QTS.
The proposed financing, which is still under negotiation, would support Broadcom’s development of AI-specific chips, including its long-term agreement to supply Google with custom tensor processing units (TPUs). The deal's scale is comparable to last year's nearly $30 billion financing for Meta Platforms Inc.'s data center in Louisiana, arranged by Blue Owl Capital Inc. and Pacific Investment Management Co. In April, Broadcom also announced an expanded partnership to provide Anthropic with additional AI compute capacity starting in 2027.
This potential transaction highlights the increasing role of private credit in funding the immense capital requirements of the AI industry. It also marks a significant expansion for the private credit market, which has traditionally served lower-rated companies, into financing investment-grade, blue-chip corporations like Broadcom.
The roughly $35 billion financing package would provide Broadcom with critical capital to scale its custom semiconductor business, positioning it as a key alternative to Nvidia Corp. in the booming AI chip market. The funds are directly linked to fulfilling major contracts, most notably a long-term agreement disclosed in April to develop and supply custom TPUs for Google through 2031.
This move follows a broader trend of massive capital expenditure in the AI sector. The top four hyperscale data center operators are projected to spend a combined $725 billion this year on AI data center equipment and related capital projects. The scale of the Broadcom financing underscores private credit's growing importance as a core funding source for this build-out, stepping in to provide flexible, large-scale capital that may be harder to assemble through traditional markets.
Broadcom, an investment-grade company, is not the typical client for private credit, a sector built on financing lower-rated or non-rated businesses. However, this deal signals a strategic push by the industry's largest players, like Apollo and Blackstone, to penetrate the blue-chip corporate landscape.
Apollo has already completed several multi-billion dollar financing deals with high-grade companies, including Intel and French utility EDF. The firm has previously stated that such investment-grade opportunities could help expand the total private credit market to as large as $40 trillion. For Blackstone, the deal aligns with its heavy investment in AI infrastructure across its real estate, infrastructure, and private equity divisions. The firm’s early move into data center construction with QTS has positioned it to finance the entire AI ecosystem.
This article is for informational purposes only and does not constitute investment advice.
