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The deal, announced on Monday, is the biggest ever to raise money for AI infrastructure

Hock Tan was running out of patience.

The CEO of chip maker Broadcom AVGO 2.33%increase; up pointing triangle had spent nearly two months trying to get banks to commit over $40 billion to the largest artificial-intelligence debt deal ever. It was meant to allow Anthropic to lease specialized chips that Broadcom is developing with Google.

Though Anthropic was the main beneficiary of the deal, the startup needed help from its bigger commercial partners to raise the money. Together, Anthropic and Broadcom were trying to close the deal ahead of Anthropic’s filing for its widely anticipated initial public offering.

Broadcom, the supplier of chips to Anthropic, was at the center of the action. Thanks to its sterling credit rating, it had already agreed to provide some financial guarantees to make banks more comfortable with the sizable risk of lending over $40 billion. But over the past few weeks, some of the banks grew increasingly anxious about participating in the deal, known as “Project North Star,” people familiar with the matter said.

Given the rise in interest rates and growing difficulties in the markets for artificial intelligence ventures, some banks felt they weren’t being compensated enough to take the risk and considered pulling out altogether, the people said.

In the end, Broadcom’s CEO held 11th-hour talks with bank executives over the weekend to get them to finalize their commitment to the deal and also agreed to higher interest rates on the loans, the people familiar with the matter said.

Banks also got more comfort around the guarantees from Broadcom that will protect them from losses in case Anthropic defaults on the loans, the people said. The deal, led by Bank of America, Citigroup, and Morgan Stanley, was announced late Monday after Anthropic released its IPO filing. Another chunk of debt, partially financed by Blackstone, brought the total commitments to $63 billion.

Broadcom’s role on different sides of the transaction—supplier, guarantor, negotiator—and the CEO’s intervention speak to the interlinked nature of the big AI bets transforming the economy and the high stakes for all involved.

Startups like Anthropic and OpenAI have voracious demand for chips to power their AI models, but they can’t just buy all of them on their own. Broadcom and other intermediaries are now helping them raise billions of dollars, but even with their support, raising money for artificial intelligence is becoming more difficult.

Banks and other investors want to limit exposure to the industry, which some believe is exhibiting signs of a financial bubble. Higher interest rates are also making it harder to raise capital, giving lenders an upper hand as they can pick and choose which deals to finance.

In the North Star deal, a shell company is borrowing the $63 billion to buy the chips designed by Broadcom and Google, known as tensor processing units. Anthropic’s lease payments are used to repay the loans, and Broadcom uses its balance sheet heft to guarantee that lenders will get their money back. Since the borrower is the shell company, Broadcom only assumes risk if Anthropic can’t make its payments.

The $63 billion deal is historic in several respects beyond size. Banks and private-credit firms like Blackstone, which regularly compete with each other, came together on the biggest ever financing of artificial intelligence infrastructure. The banks also plan to distribute half of their debt, around $22 billion, to the investment-grade bond market, the deepest pool of capital in the world.

One risk: The banks don’t plan to sell any bonds to fund managers until later next year when the chips are delivered, people familiar with the matter said. If interest rates rise sharply in the interim, the banks could have to sell the debt at a loss because they have promised to cap the interest rate of the loans. Some banks may choose to keep the loans rather than selling at a loss, two bankers close to the deal said.

On top of that, North Star involves another $18 billion in riskier debt that won’t carry a Broadcom guarantee, half of which will be financed by Blackstone. Private-credit firms, insurers and hedge funds have bought similar deals over the past year but intensifying volatility in financial markets related to AI may curb their willingness to take on the risk tied solely to Anthropic.

North Star is the sequel to another Anthropic and Broadcom chip-financing deal called “Big Sky.” Apollo financed some of the riskier parts of that deal and still hasn’t been able to complete some deals with investors to unload debt, people familiar with the situation said.

“North Star” is part of one of the many arrangements critics have dubbed “circular financing” as AI companies race to build data centers. In Anthropic’s IPO prospectus, the company estimated that it will pay more than $125.2 billion to lease Broadcom chips, and Broadcom and Google have respectively committed to provide $42 billion and $20 billion to Anthropic.

One reason it has been hard for arrangers of the deal to persuade other banks to pitch in: Debt markets are getting indigestion from hundreds of billions of dollars of AI-related bonds and loans. Many banks are still trying to unload loans they already committed to, limiting capacity to make new ones, debt fund managers say.

The flood of supply—combined with investors’ mounting fears that some AI bets will go bad—have made the loans a tougher sell. Some banks have traded the loans to clients at a loss to free up capital, while others are holding on, limiting their ability to do new deals. The logjam is leaving some banks stuck with loans made to riskier players in the AI ecosystem.

Morgan Stanley has been struggling to place a roughly $300 million bond backed by loans it made to help finance a data center project in Kansas City dubbed “Project Blitz” operated by Lambda, the debt fund managers said. Lambda is a “neocloud” startup, like Coreweave, that uses borrowed money to buy chips and rent their computational power to AI developers.

Morgan Stanley has found few takers for the Project Blitz bonds despite roughly doubling the yield they will pay, the debt fund managers said.

Agreement comes as linear broadcasters struggle to compete with US media giants

Channel 4 has agreed to put its linear channel and many of its television shows on Disney’s streaming service, as traditional broadcasters struggle with changing viewing habits and the dominance of US media giants.

Multiple Channel 4 shows will be available on Disney+ in the UK and Ireland at the same time as they are shown on Channel 4’s main TV channel from early next year. Channel 4’s main channel and additional on-demand content will be available separately on Disney+.

Disney said that the deal with Channel 4 was one of the most significant that it has agreed globally to bring local content to its streaming customers.

Adam Smith, chair of direct-to-consumer at Disney Entertainment, said: “We see so much opportunity to continue to grow internationally.

“This deal has really been structured in a way that is deeply complementary to both Channel Four and to Disney+,” he added. “It helps surface some of their best titles and bring them to new audiences in a way that makes Disney+ feel more relevant culturally [and] drives more local engagement.”

The deal will raise fresh questions about the sustainability of the UK’s public service broadcasters, whose domestic audiences and advertising revenues have fallen sharply as more people watch either on streaming services such as Disney+ and Netflix or via YouTube and social media.

Channel 4 said in September that it would cut 340 jobs — about a quarter of its workforce — after a strategic review of the organisation aimed at “ensuring Channel 4 is the right shape and size”. The BBC is separately seeking to cut about a tenth of its more than 20,000 employees. 

Broadcasters have already agreed deals to move their content to rival services, with the BBC and Channel 4 showing their programmes on YouTube while also attempting to push their own streaming platforms.

ITV has already struck a deal with Disney to show some of their programmes on each other’s platforms as a taster, to a more limited extent than the US group’s agreement with Channel 4. ITV has agreed to sell its television business to rival Sky, which is owned by US media giant Comcast.

While such agreements give UK broadcasters greater reach, they have sparked concerns among some in the industry who fear that younger viewers may lose their connection to Britain’s media groups if they mainly watch their content on other services.

Priya Dogra, chief executive, Channel 4, said that the Disney deal was attractive because the “attribution to Channel Four will be prominent, it will be obvious to people that they are watching Channel Four programming”.

She added: “Our goal really is to make sure that our programming with our brand is available in multiple places. We’re trying to reach those that don’t always come to us on a regular basis.”

The vast majority of Channel 4’s programmes, including The Great British Bake Off and Gogglebox, are made by independent production companies.

Smith added that Channel Four demographics “lean towards youth and edginess a little bit, and I think that there is a real appetite for that on Disney+”.

The move comes as the government is in final talks to decide the future of the BBC’s funding, which could include some form of “streamer tax” that would ensure households paid a licence fee for watching US services as well as UK broadcasters.

The BBC is also in talks with Channel 4 to bring together content on their streaming platforms in a bid to create greater scale. 

- Looking ahead to next year, demand for emerging technologies is expected to remain strong, which should continue to drive taiwan’s exports and private investment

- Sees Taiwan GDP at +5.82% next year

Public S-1 filed 26 Oct; Nasdaq listing targeted for the week of 16 Nov at a reported $1.5tn to $2tn, with a $100bn+ raise.

Key points for the tape:

The full calendar to Nov 27 is in the PDF. Happy to discuss.

Laurent Chekroun

If you could have 1 million followers on any social media platform, which would you choose? There is a correct answer, and it’s YouTube, assuming you’d like to get paid for your work. But Instagram’s latest update could upend YouTube’s long-held position as the most lucrative platform for creators, if only Instagram plays its cards right.

Instagram announced on Monday that it’s testing a new type of video upload that will allow creators to share “Features,” videos up to 90 minutes long. After years in which every social platform (even LinkedIn!) aggressively pursued short-form video, this is a notable shift in strategy for Instagram.

Short-form, vertical video content has defined the internet of the 2020s, but the creators behind these clips don’t actually make much money directly from platforms like Instagram — the Meta-owned platform has some monetization tools like subscriptions, but it doesn’t typically pay creators on a per-view basis.

“You can get paid by the platform directly, you can get paid by a fan, and you can get paid by a brand,” Instagram head Adam Mosseri explained on the Colin and Samir Show, an interview show about the creator economy. “And right now, the way that it works on Instagram primarily is you primarily get paid by brands. Some people get paid by fans. We have still a small performance-based program, but … we spend more money than we make back by a long shot, and so it doesn’t really make sense to scale up because we’re just burning capital.”

YouTube’s payment model is more straightforward: There are ads on videos, and creators enrolled in YouTube’s Partner Program get 55% of the ad revenue YouTube earns from their videos. That adds up. The platform said last year that it paid more than $100 billion to creators, artists, and media companies in the previous four years.

Instagram and TikTok haven’t been able to replicate YouTube’s model with short-form content, which is inherently trickier to monetize than longer videos because there’s less room to place ads. Many creators see those accounts more like promotional arms for their YouTube channels than meaningful drivers of revenue.

Instagram is encouraging creators to upload longer videos, as it already did eight years ago with the now-defunct IGTV. It’s possible that its parent company, Meta, which makes its billions on advertising, will put ads in those long-form videos, too.

If Meta does add ads, could Instagram meaningfully compete with the YouTube Partner Program for the first time?

“It’s too early to share a long-term monetization model, but we’re exploring ways for creators to earn from brands, fans, and Instagram, including performance-based incentives,” a Meta spokesperson told TechCrunch. “Over time, we think there will be compounding benefits for creators to tell new stories, reach new audiences, and find new partners, which should lead to many monetization opportunities.”

It’s not a particularly promising answer, but it’s also not a no.

Mosseri explained in a video announcement why the platform is suddenly embracing long-form content after scrapping its old video product, IGTV.

“For a long time, I have been against doing long-form video on Instagram,” Mosseri said, noting that shorter content like Reels drives more shares and DMs among users. Instagram VP of Product Tessa Lyons, who has been advocating for this change, finally convinced Mosseri to give long form another shot.

“Reels is still going to be a core part of Instagram. But when you want to go deeper with the creators you love and the content that they’re creating, you should be able to do that on Instagram,” Lyons said in the video.

In other words, Instagram would rather keep fans on its own platform to enjoy both short- and long-form content from a creator than lose them to YouTube. Instagram is testing a feature called “Clips as Reels,” which lets creators make Reels out of their long-form content. The Reels link viewers to the longer video. Viewers can also save the longer video to send to the Instagram app on their TV.

Instagram is currently testing “Features” and “Clips as Reels” in Brazil and will now expand to the U.S. in a small test. The platform is also working on improved discovery features for Live video and a hub on a creator’s profile for episodic Reels, meaning a series of connected Reels similar to TikTok’s playlist feature.

“The thing that the team has been working on that we’re excited to share with you is trying to make it so that the short-form and the long-form video can be symbiotic,” Mosseri said. “We’re going to try to support these different types of formats, both in the mobile app, but also on the TV app, which I think is … going to take some time to get right. But I’m actually very excited about it, and we’re very committed to it long term.”