Broadcom Seeks More Than $60 Billion in Latest AI Debt Deal

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2:13Carol Massar:One of the things we want to get to, too, is a story that we've been keeping an eye on, and that has to do with Broadcom. And the company apparently in talks with a group of lenders to raise more than$60 billion in debt for an AI chip financing deal that will benefit Anthropik and other companies, according to people with knowledge of the matter. This right through, let me just see, hit just after the closing bell. And just real quickly, let me just pull it up and see if we've seen, yeah, You do see shares of Broadcom just up about four-tenths of a percent or so here in the aftermarket. We should get to it with Ryan Gould.

2:49Carol Massar:He is Bloomberg News deal reporter, and he is in the Bloomberg News Washington, D.C. Bureau. Hey, busy, busy guy. These deals, fast and furious. Tell us about Broadcom. Ryan, what did you find out? Yeah, sure. Good to see you, Carol, as always. I think this one is, if this comes to light, comes to pass, this would be among the largest that we've seen of this type of deal. I want to just throw us back a little bit to June when we saw Broadcom announced that partnership with Blackstone and Apollo, where essentially they were looking to strike an agreement to provide sort of 20 gigawatts of compute globally for AI deployment.

3:26I mean, I think you could probably see this as some kind of extension of that agreement of sorts. This would essentially see Blackstone and Apollo participate again per hour sourcing and reporting in a deal that could essentially see Braulcom line up as much as$100 billion in debt. I mean, when you put that together, it's sort of$30 billion being provided by Apollo and Blackstone. And then Braulcom itself essentially looking at maybe backstopping such guaranteeing somewhere in the region of$60 to$70 billion per sourcing. So not insignificant. And I think this is kind of, you know, where the trend is sort of heading right now, which is just this insatiable need for AI compute to use the jargon.

4:04Carol Massar:And I will just say, the market takes it, or we'll see, right? Like, ultimately, that's what we continue to watch if there's the investor appetite. But as we talked earlier at the beginning of our broadcast with Ira Jersey and Michael McKenzie, you know, investors are, you know, offering these corporate offerings for debt are higher than what you're seeing maybe in treasuries and potentially crowding out increasingly the interest, I should say, when it comes to treasury demand. Yeah, Ryan, I mean, do we have an understanding yet of like what what kind of debt this would take form of? I mean, we know that Blackstone and Apollo will be leading the financing, but you have to imagine that they're going to be several different tranches and they'll be selling this to other institutional investors, right?

4:51Totally. Yeah. So, I mean, in the in the story we just put out that just crossed a short while ago, I mean, I think the best way to probably think about this is that the Blackstone and Apollo piece will be a junior piece. and then sort of chunk the slug that Broadcom is looking to, that that 60 billion piece, if you will, is going to be senior secured. And they are out to banks, among others, as part of that group. You would have to expect that there would be a number of banks here that would be looking to help Broadcom with this. Because I think if you think about just the sort of cost of providing something on this scale, I mean, Broadcom is looking to do this as efficiently as possible.

5:27and Hocktan, the CEO of Broadcom, is known for this very, very intricate kind of financial engineering. And in fact, I think Broadcom has become kind of an industry leader in this part of the sort of chips financing space. So, I mean, when you sort of think about this in the round, this is kind of unprecedented. But if anyone's going to pull this something like this, this would be Broadcom. It definitely just shows, right, Ryan, like how expensive it is for these companies to build out all of the AI infrastructure with that prior deal that Blackstone and Apollo led. It was$35 billion, but it was only to build out capacity for one gigawatt of compute.

6:10And in your story here, we're talking about a partnership that could eventually reach 20 gigawatts of compute. So there's going to be a lot more of these, right? Yeah. I mean, I think this is kind the tip of the iceberg and i think you have to wonder you know we sort of single out anthropic at the top of that story on the bloomberg but you know there are also going to be other companies of the beneficiaries of this deal and this will come out in the wash but um i think if you're if you're looking on now i mean you think about the agreements that warcom has with other companies including apple we throw that out there they have the accord that they announced earlier this year um i don't want to throw it back there but i will go there i mean you know do we start to talk about the circular financing thing.

6:50I don't know, perhaps. I don't know. But here we are.

6:53Carol Massar:You know, and I think this is something we have to watch, right, Ryan? I go back to the interest. I mean, as long as investors are willing to support it, why wouldn't you tap the credit markets or the debt markets and continue with the fundraise? I will say when we talk to our Amanda Epsing of Bloomberg Intelligence, who looks at the AI spend as a whole, I mean, a lot of the fundamentals seem to continue to be there in terms of backlogs and demand. We saw that on the recent earnings. And a lot of folks anticipate who are in this sector, mind you, they might be talking their book, expect this to continue for a couple more years.

7:28Yeah. And I think that's probably true. I think you also have to think about this in the context of the NVIDIA transaction that we saw. You know, that group of CEOs, Goldman, I mean, David Solomon was there, Larry Fink was involved. That group of financing partners sort of coming together for one provider. I mean, now you have a sense to where I think Qualcomm's probably going more down the private capital route. I think it's just, it's different, right? I think it's two sides of the same coin in a way. I think investors will clearly take a view on sort of the securitization of all of this. I think the NVIDIA agreement itself still has a little bit of, you know, there are few details there that still need to be sort of fleshed out as far as how you actually securitize those chips as a financing class.

8:10But, you know, that itself was entirely novel. This is This is also novel. I think that NVIDIA deal did obviously unnerve a few people. But this is just, I think people are having to think on the fly here as far as this AI financing rollout is concerned.

8:24Carol Massar:Right. And maybe it's just a case of it's just so massive that we've got to be innovative, disrupt a little bit. Or when you start to innovate or disrupt too much, is it a sign that maybe something's not quite right? And this is what we're all trying to figure out here. But the cap raise is still happening. Ryan, thanks so much for jumping on. This is obviously a big story for us continuously. So good to get your view on that. That, of course, is our Ryan Gould. He's Bloomberg News Deals reporter out there in D.C. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

8:58So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off. Deep in the work that moves the business. Let's create smarter business. IBM. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same.

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10:42Or watch us live on YouTube.

10:45Carol Massar:Hey, Wells Fargo today outpublishing its first GLP-1 report. There's so much money invested in these GLP-1s, so the banks have to get involved somehow. Well, they do, right? And what's interesting is I feel like the last three years it's been AI and GLP-1s. And there's been certainly ups and downs in the narrative has changed. Specifically, this report, it is their first of its kind from Wells Fargo. It's about how GLP-1s are reshaping America's health, spending habits, and healthcare system, Emily. I thought this was a very interesting perspective because you hear a lot about how these weight loss drugs are impacting what people are eating and snack companies.

11:25Clothes if they're losing weight. Exactly. But this is specifically on the healthcare system. So let's get into it. We're joined now by Robin Wenzel, head of Wells Fargo Industry Insights with us from Minneapolis. Robin, great to see you. Thanks for joining us. Tell us about this report and why now? Why look into this trend right now?

11:45Carol Massar:Thanks so much for having me. It's great to be here. You know, one of the reasons why is we have a large health care practice, a dedicated team that specializes in it. And we like to make sure we stay ahead of a lot of the topics and conversations that impact those businesses. So for us, looking at GLP-1s, we've all certainly seen a lot of conversation around how it impacts consumer purchasing and grocery store sales. But we really wanted to dig in and understand the implications for the healthcare industry. And many of the things that we found were quite surprising to us. Like what? You know, I'll start with bariatric surgeries.

12:22Carol Massar:If we look at the rate of bariatric surgeries between 2022 and 2024, we saw them decline by over 30%. And that was at a time where we saw GLP usage rise by about 120%. So bariatric surgery has really been a go-to for managing late-stage obesity and helping to bring that weight down. And when we look at the impact of GLP-1s, really a game-changer in terms of results and being able to help people get that weight off in a very effective manner. So being able to use that pharmaceutical off-ramp to avoid surgery is certainly a nice outcome for many people. Conversely, though, on the other side, we do see people that were not able to get the bariatric surgery, but the GLP-1s are allowing them to get to a healthier weight that allows that surgery to be possible.

13:13Carol Massar:So great for people, right? Right. But, you know, when I think about health care, great for people and great and probably extending their lives in so many different ways. But I do think about the impact, too, on like health care systems and hospital systems. Right. If they're doing less surgeries. Absolutely. And I think what we have to look at is understand that this is a long term solution to obesity. So it can take time for these drugs to take effect, to have impact. So certainly a lot of the care that these patients receive will be ongoing. It's going to be a slow off ramp for them. But it's also nice to be able to have some other solutions and open the doors for others who have been battling obesity and some of the complications with it.

14:01Carol Massar:I think for hospitals, it's an opportunity to really change the game and maybe the profit centers for helping these patients. So it can become more about outpatient services, medication management, management of side effects. And really, you're on these weight loss drugs for life. So the ongoing help and support to patients. How are the drugs reshaping what pharmaceutical companies choose to pursue and do research on? You know, that's a great question. And it's an interesting one. And we can see that the late state pipeline of pharmaceutical R &D is heavily weighted towards GLP-1s. And it's not necessarily just for obesity.

14:43Carol Massar:We are seeing other opportunities coming out of these drugs and potential opportunities. One is the treatment of substance abuse, specifically alcohol abuse. And so we're seeing some research going into that. We've certainly heard about maybe some positive results around Parkinson's disease and dementia. So I think expanding and understanding these drugs and how they can help with other disorders is really a focus for some of these manufacturers. Okay. I feel like, Robin, I'm the Debbie Downer here. I'm just going to go there. No, I've kidded with our reporter, Madison Muller, who has covered this space extensively and so smartly.

15:21Carol Massar:But it does feel like this is the drug that can cure so much that ails us. Having said that, it's also a reminder that having extra weight or being obese is a problem for your health. It's a reality. And I don't want to get into how that can get people uncomfortable about criticizing that. But it's just a fact of life, right, in terms of your health. But the other thing, what I'm thinking about is how does the emphasis and stress on GLP-1s maybe crowd out R &D spending on other drugs that also need to be discovered? You know, so they're taking up a bigger share of the late stage R &D pipeline.

16:01Carol Massar:That doesn't necessarily mean that they're taking up dollars. So we can see that GLP drugs have outpaced oncology, you know, as a percentage of R &D spend. But that doesn't mean that those dollars towards oncology have diminished. In fact, they haven't. So I think what we're seeing is that we have a very widespread problem, specifically here in the U.S. with 40 % of U.S. adults classified as obese. It's a medical diagnosis. And so finding treatment for this population, as you said, it's all aspects of their health. So there's a cardiovascular element to this too. So it's really not just a weight loss drug.

16:41Carol Massar:It's a cardiometabolic drug. And so it can be a game changer towards the health and prevention for many, many people impacting several that can benefit from this drug and enjoy a much healthier life. I've seen it directly, like impact people and just they are so much healthier and it's just their outlook and situation is so much better. Yeah. I mean, Robin, what are the, this is pivoting a little bit, but I do want to ask what are the investment implications from this report? What do investors need to know? You know, I think we're looking at a situation where it's heavily weighted towards these drugs.

17:17Carol Massar:And so any sort of disruption that could happen, supply constraints, those would ripple through and they would have an impact maybe broader than most people would expect. I do think there's a lot of research still to be done. And so the fact that there's money and capital going into it is a good thing. The other good thing is we are seeing the results. And so it is very promising in many areas. I'm encouraged by the investment, but I would just caution that it could have some larger impact should any hiccups happen along the way. You know, one of the things I wanted to ask you, like orthopedics or something like that, where losing weight or being slimmer can be better on your joints, it's not so much stress and so on and so forth.

17:57Carol Massar:So maybe there's less demand for surgeries or so on. But at the same time, if GLP-1s, which is a good thing, is enabling folks to live longer and being a drug that's so productive in helping a lot of different things that certainly age an individual that might orthopedics benefit because we're just around longer and we're going to all need kind of an overhaul. Yeah, I think it's an excellent point. And I don't think the data has settled on that yet. So, you know, on one hand, one of the side effects of long-term obesity is that wear and tear on the joints. It's the knee replacement, the hip replacement.

18:33Carol Massar:If we're able to prevent the weight and keep the weight off, that could, in theory, reduce the need for those extra interventions. However, you know, as you point out, you become healthier, you lose weight, you can become more active. You know, we can see a whole new slew of runners out there. Right. And people embracing, you know, exercise. So it's a mixed bag. And I'll go back to the other opportunity that that weight loss presents. Again, people who wouldn't otherwise qualify for the surgery, now it opens the doors for them as well by allowing them to lose weight and get a little healthier.

19:10Carol Massar:Yeah, no, I love this. I love this deep dive. Thank you so much. Really, really appreciate it. Robin Wenzel joining us. She is head of Wells Fargo Industry Insights, joining us from Minneapolis, their new report about how GLP-1s are reshaping the business of healthcare. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. We're going to head out to our West Coast, San Francisco. And Laura Bliss, she is Senior Editor for Bloomberg Businessweek.

19:45Carol Massar:Hey, Laura, good to have you here with us. A lot going on. Tell us, I feel like we were talking earlier a little bit about climate change, heating temperatures. Landfills, though, have been a problem for a while. What's going on and what did you guys pick up on? Yeah, thank you so much for having me. I mean, just to set the stage a little bit, you know, every one of us, we all generate waste. We're all interacting with it every single day. And yet, I think so many of us have the privilege of not thinking very much about what happens to it when it leaves our hand or the curbside barrel. But this story and kind of this reporting project that my colleague Rachel and I have been working on for the last year plus really looks at, you know, where does it go and what are some of the kind of unexpected consequences.

20:31And so the more waste that we're generating, the bigger landfills are getting. And one of the kind of downstream consequences of that are these overheating landfills. And so in our most recent story, which published this morning, which was a follow-up to a big investigation we did last year, we looked at public records from about 100 landfills in 20 different states and found that many of them are reaching much, much hotter temperatures than federal regulations want them to be reaching. And in some cases, this is generating really significant problems for the communities nearby. As one example, the images you're seeing right now, if you're watching, are from Shoesmith Landfill, which is outside Richmond, Virginia, where super hot temperatures, this is like almost 200 degrees Fahrenheit inside the waste in the landfill are causing problems like millions of gallons of leachate, which is essentially trash juice to kind of be pouring out of the landfill.

21:35That doesn't sound good. Yeah, some of which has been found getting into local waterways. Hot landfills can also be incredibly odorous. They can release toxic emissions. Neighbors at another one of these sites in LA, you know, have said they've been sickened with things like headaches and nausea and even more serious health problems like cancer, which public health officials have been looking into. And so this current story really looked at how our operators, the landfill companies, as well as regulators responsible for protecting public health, environmental health, responding to, you know, elevated temperatures when they're getting reports that this is happening.

22:16And what we're finding is that they're really not taking the steps to intervene that experts say are needed to prevent these situations from getting much worse. OK, I want to talk more about that. But just first, can you remind us, how does a landfill overheat? Why would that happen? Yeah, it's a really good question. And this is actually a surprisingly contentious question. I mean, so just add a kind of baseline. This is a little bit chemistry 101, right? You know, landfills naturally generate some heat, right? Waste is breaking down. It's supposed to be an anaerobic process, which means no oxygen in the waste.