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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.