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

0:00When your options are limited, so are your opportunities. At SIBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next. SIBO. Life is better with options. Your investments could be too. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers.

0:30Scarlet Fu:Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

1:12Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

1:46Scarlet Fu:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. I want to bring in Mandeep Singh. He is our global head of tech research here at Bloomberg Intelligence to give us kind of a preview into not just NVIDIA results, but Broadcom as well, as the semiconductor stocks seem to have lost a little bit of momentum, you know, over the last couple of weeks. Mandeep, when NVIDIA reported results a couple of years ago, it was like a cultural event.

2:29Scarlet Fu:People held watch parties in bars and cheered when the numbers came out. They were all tuning in to Bloomberg Television, to other financial news networks. Are NVIDIA results still the cultural event that they once were? Well, I think NVIDIA has become a lot bigger, and it's hard to produce those kind of beats that they did a couple of years back. But still, it is one of the biggest tech names in all indices. And look, I think when it comes to this AI cycle, NVIDIA still is at the front and center of the build-out, and now they are using their balance sheet for a lot of the build-out to happen.

3:10And so they're not just selling the chips, but also using the balance sheet in a big way to create an ecosystem around what they're doing. Mandeep, let's talk a little bit about Broadcom. You know, one of the things that we've been concentrating on is how much issuance has been coming out of AI issuers into the corporate market. But the deal that they're talking about financing now with Broadcom is a little bit different because it's talking about doing debt of different parts of the capital stack. How do you think about that from looking at the balance sheet of these companies and how much debt that they issue and where?

3:45Does that matter for overall valuations for you or thinking about how they might finance themselves in the future? It does. And I think this Broadcom deals specifically the$60 billion of debt and what NVIDIA announced a couple of weeks back with the six private equity players of around$500 billion. That's an interesting structure, the special purpose vehicle structure that will buy the chips from Broadcom in this case and then lease it to Anthropic. And the goal here is for, you know, Broadcom to sell its chips. But Anthropic doesn't want to pay for all of that up front so that it doesn't have to carry that on its balance sheet.

4:32I mean, remember, Anthropic is a fast-growing lab that is, yes, at a very high trajectory, but doesn't have the balance sheet of the hyperscalers, you know, in terms of paying up for those chips and setting up their data center. So in this case, I think it really helps avoid Anthropic kind of buying all of that as opposed to leasing, which is what they would be doing in this case with the special purpose vehicle structure. And the same thing is with NVIDIA. NVIDIA is using its balance sheet along with the private equity players to set up this special purpose vehicle, which will buy the chips and then lease it out to, you know, users like OpenAI or other companies that want to use those chips.

5:19Scarlet Fu:I have a dumb question. We know that some of the hyperscalers, I believe it was Alphabet that went negative free cash flow for the first time this quarter. Is that right, Mandeep? Yes. Could an NVIDIA ever go negative free cash flow, given the build out that's required here for all this AI infrastructure or because it's a key supplier, it's not in the same boat? No, because I remember they are generating, you know, like almost 100 billion plus and free cash flow every year. So they've become what Apple has done over the past decade, you know, and with 75 percent gross margins, they will continue to do that in the foreseeable future.

5:59And they're not setting up their own fabs. So the only investment they have is really in terms of backstopping a lot of these SPV structures. So I don't imagine NVIDIA kind of making a big investment that they will get into negative free cash first situation.

6:20Scarlet Fu:OK. Before we let you go, Anthropic, it feels like we're starting to get more details about its upcoming IPO. For instance, our reporting here at Bloomberg indicates that Anthropic will match or beat the size of SpaceX's record setting. Stay with us. More from Bloomberg Intelligence coming up after this. Market environment. Is this something where if equities turn south or the bond issue becomes more turbulent, the Anthropic might delay its IPO? How sensitive do you think Anthropic is to those macro conditions? very unlikely given what we have seen with spacex and remember entropic has gone from almost 10 billion dollars in air to 65 billion dollars in a span of eight months and they expect to close the year at around 100 billion dollars in air almost at 10x when you have a company like this at this scale i mean they would not have a problem uh going public and raising money and And given how well SpaceX did, you know, with$18 billion run rate and much slower growth, I mean, people would be lining up for this IPO, regardless of the market conditions.

7:26Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. When your options are limited, so are your opportunities. At SIBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next. SIBO. Life is better with options. Your investments could be too. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done.

8:08Scarlet Fu:ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Everyone's talking about how AI is transforming work, especially in sales.

8:48While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

9:16Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. We were talking, Ira, about Anthropic and this AI company that's going to come public at some point. And Mandeep Singh doesn't think that market conditions will be a deterrent for it if something were to happen. Yeah, the IPO market, I don't remember it being this robust for the last 15 years, really, right? There was a lot of when interest rates were at zero, a lot of companies either didn't go public or were issuing debt as a form of financing.

9:57But now it seems like the primary market in the equity world is open for business and a means of financing for a lot of these names.

10:05Scarlet Fu:All right. Anthony Hughes is with us. He's our senior equity capital markets reporter. Anthony, what do we know about the upcoming IPO? You've been doing a lot of reporting on it. Yeah, well, obviously, after the experience of SpaceX in June, we're well versed in this process. But there has been certainly a pickup in the number of stories about Anthropic in the last few weeks. And I think you could say that that is perhaps a leading indicator that the deal is getting close to fruition. and, you know, I think based on a whole bunch of different stories, I think you could say that we're sort of basically expecting Anthropic to file pretty soon here, potentially as early as late next week, I think, would be possible.

10:44And if they did that, they would have to wait 15 days to launch the deal and then after about a week or so of a roadshow, they would go public. And the way the math of that works out is that Anthropic could potentially be public in sort of late September. I mean, I think talking to some sources, I would say that people were talking, oh, maybe it's going to be late September, early October. So there's always a potential for some slippage there. But I think as we saw with SpaceX, when it's a deal that's going to create a lot of excitement, good and bad, I think that Anthropic is going to be something that investors are going to want to take a good look at.

11:22And I think there's nothing that's really going to stand in the way of it actually going full speed ahead and not having any delays. So I think you have to pretty much assume the situation. and SpaceX was really quick, but Anthropic will be pretty much on schedule after they file confidentially on June 1. But, you know, it's sort of a two-, three-month review process after you file confidentially. But you can see here that Anthropic is sort of basically positioned to go public, you know, right on schedule after they file confidentially, basically. Just really quickly, does it seem like there's going to be decent demand?

11:52I mean, obviously some of these deals have come with just absolute, you know, eye-popping demand numbers. Is the same thing likely for Anthropic? Well, I think it remains to be seen, but I think the indications I'm getting from people we talk to in the market is that, you know, there is going to be a lot of interest in this one. I mean, the reality is if whether you're a believer in AI or not, the company has a very high growth rate. And, you know, when you ever see a company with a high growth rate, there's going to be a lot of interest.

12:17Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects.

12:58Scarlet Fu:Get started at ChachiPT.com by selecting Work Mode, available on Plus and Pro plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. you'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio.

13:33Start your free trial at adio.com slash iHeart. Join Bloomberg for the Canadian Finance Conference, proudly sponsored by National Bank of Canada Capital Markets, on September 29th in New York. Hear from influential corporate and government leaders as they discuss the strategies shaping Canada's economic future. Connect with senior decision makers, gain actionable insights, and be part of the conversations driving business forward. Register at bloomberglive.com slash Canadian Finance. That's bloomberglive.com slash Canadian Finance.

14:07Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. We're at the end of a week in which we got some big earnings from the retail sector. notably Walmart, Target as well. I'm curious in terms of what this all means for where things stand for the U.S. consumer and the road ahead. Let's bring in Poonam Goyal. She's senior U.S. e-commerce and retail analyst at Bloomberg Intelligence. She joins us now from Princeton, New Jersey.

14:43Scarlet Fu:Poonam, Walmart has had a rough go. The results were okay, but investors were not too impressed. And in fact, the stock is down for a sixth day in seven. Yesterday, it plunged 9%. Today, it has extended that decline. Are people rethinking whether Walmart can come out ahead in this higher interest rate, higher inflation environment? Sure. So I think I think there's two things happening with the results yesterday. The first is that when you look at the Walmart results, the underlying health of the consumer remains strong and remains intact. Because what really caused the stock to fall is the deflation that we're seeing in pharmacy sales.

15:21And that caused the comp to be weaker than expected and 3Q guidance. that headwind remains in place for the back half of the year. So that is going to deflate Walmart's comp as we move into the back half. When we think about the consumer and how the consumer is shopping, traffic was up. In fact, traffic was up at both Walmart and at Target. So those are encouraging signs that the consumer is still going out and spending. And when you look at the e-commerce sales at Walmart over 20%, it shows you the strength of the spending. Now, does the consumer care about value? Absolutely. Both retailers are slashing prices, they're providing more value, and we think that will continue to draw customers to their brands over others.

16:03But Poonam, in the longer term, how have we seen the tariff picture and a lot of the, I don't want to call it a trade war, but the budding of heads between President Trump and the Chinese administration on tariffs? And has that affected either of these retailers? I know Walmart used to get a significant amount of its stock from China? Yeah. So when you look at Walmart specifically, more than half of Walmart's business is grocery. So much of that stuff is less impacted from what comes from China. But when you look at the discretionary side of the business, apparel, home, toys, et cetera, there is an impact.

16:42And yes, tariffs have raised costs for retailers like Walmart and Target and even others across the U.S. because most of what we consume is brought in from abroad, especially on the discretionary side. Now, that said, I think the tariff situation was worse off last year when we were talking about 100 plus percent tariffs from China. From that standpoint, we've come down a lot. And I think the new tariffs that are in discussion are calling for a 10 to 15 percent increase. Those are manageable. So I think we're at a place where retailers now know how to mitigate some of this tariff increase through supplier negotiations, through internal efficiencies.

17:20And yes, they're passing some prices on to the consumer, but Walmart and Amazon, they're trying to hold back for as long as they can before they can pass those on.

17:30Scarlet Fu:The tariff refunds have been a big theme for company earnings this last quarter and will probably continue to be. But I wonder for how much longer, because it feels like it's a one-time boost, but you can't count on it going forward, can you? Absolutely. It is a one-time boost for sure. So it helped in 2Q results for many retailers across the board, including Walmart. I think the boost gets smaller as we move through the back half for most retailers. The bulk was realized in the second quarter itself. But I wouldn't expect this refund to continue into 2027. I think we will see some in 3Q. But once they've essentially received or gotten that refund back, that's it.

18:12The new tariffs in place don't qualify for a refund. So, Poonam, talk to us a little bit about how consumers have been shifting their patterns of purchases. You know, when I look at the retail sales report at the macro level, it often, you know, they have non-store retailers and it's still relatively small compared to all the times that I click online to buy something. It seems like it's, you know, a lot more that I seem to purchase online, but it's only 20-ish percent of total retail sales comes from online. You have a really great chart here in your chart pack from about 10 days ago, talking about active users on different apps and stuff like that to buy.

18:54So have these trend toward online slowed down at all, or how have any of those trends been changing? Sure. So when you look at those numbers that you're talking about in the retail sales report, the one thing I'd keep in mind is when you're looking at that non-store retail line, you're not looking at e-commerce sales from the brick and mortar businesses themselves. So a big piece of the equation is missing. By our estimate and our e-commerce model, retail online sales as a percent of total retail sales are closer to over 25 % today. And we think they're edging to 31 % of total retail in the next three to four years.

19:31So the opportunity for retail sales to grow online is still very vast and it's still very large. In fact, when you look at some of the numbers, whether it's from Amazon or whether it's from even Walmart, you're seeing plus 20 % gains in e-commerce. So I think the shift to e-commerce is still very much real. It's happening. It's outpacing store growth. That said, there are some categories that do better online than others. For example, food is still underpenetrated online. And while we're seeing it increase slightly, there's a long runway to go on the grocery side of the business.

20:03Scarlet Fu:Yeah, I think about Walmart Plus and how much money Walmart has put into developing its e-commerce platform and how it's paid off tremendously insofar as the stock return has done much better. And the company is trying to call itself a bit of a tech company in many ways. What has Target's efforts been like when it comes to e-commerce? So Target's also making an e-commerce push. They have Target. They have the shipping with Target also as part of their membership and their Target Circle. I would say that the two are a little different when you look at how big they are in e-commerce. Walmart scaled up quite nicely, right?

20:37Walmart's today about$150 billion when you look at its e-commerce sales. Target's not there yet. And one of the big reasons that you're seeing such a differentiation between the two is much of Walmart's scale in e-commerce comes from food and grocery. So when you think about Walmart Plus, it's I need avocados today, so I'm going to get them shipped. I need spinach. I need this. It's easy. Whereas Target, the mix of Target's business is 20 % grocery and 80 % discretionary and Walmart's 50 % grocery or more. So there's a clear differentiator in how big each of those can get based on the verticals that they compete in.

21:14Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects.

21:55Scarlet Fu:Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster. With revenue agents and automations working around the clock, you'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio.

22:30Start your free trial at adio.com slash iHeart.

22:34Scarlet Fu:Next week on Leaders with me, Francine Lacroix. I speak with Harvard Business School professor Linda Hill about what CEOs need to know to be successful. It really is not about them. It is about the organization. About how to lead in the age of AI. That requires a lot of confidence. And why great leaders embrace conflict. You need to amplify difference. Listen and watch Leaders, the podcast with me, Francine Lacroix, on Bloomberg TV or wherever you get your podcasts. you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple car play and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube so we've got ira jersey he is a noted soccer um i don't want to say fanatic but fan i'm a fanatic i also own a minor league soccer team okay so he's an investor as well.

23:31Scarlet Fu:Let's bring in Randall Williams. He's our Bloomberg Business of Sports Reporter. A lot to talk about with you, Randall. And we'll get to soccer momentarily, and Ira will school you on all of that. But I wanted to get your take on what's going on in baseball, because there's an interesting development here with shares of the Atlanta Braves, which is publicly traded. Short sellers are ratcheting up their bets against the company because they're worried that there's going to be a lockout for the 2027 season. So we're seeing it play out in financial markets. Short interest in the Class C stock of Atlanta Braves has tripled over the last 12 months to almost 7 % of shares available to be traded.