Key insights
- A $35 billion private credit deal involving Apollo and Blackstone financing Anthropic's AI compute expansion using Google TPUs, rather than Nvidia GPUs, signals a shift in AI infrastructure financing. While not a direct blow to Nvidia's dominance, it creates space for competitors and highlights the growing role of private credit in funding massive AI build-outs. This could indirectly benefit chip manufacturers like Micron if overall AI demand continues to surge, but it presents a nuanced competitive landscape for Nvidia.
Two of the largest asset managers on Wall Street are rewriting the rules of AI infrastructure financing, and the deal they just made public is sure to have a substantial impact on the industry as a whole. What does it mean in particular for Micron (MU 5.50%) and Nvidia (NVDA 2.16%), two of the biggest winners of the AI build-out thus far?
Apollo Global Management (APO +1.74%) and Blackstone (BX +2.60%) finalized a $35 billion financing deal to aid Anthropic in its expansion efforts. The agreement is one of the largest private credit deals ever.
The deal is structured using a Special Purpose Vehicle (SPV) to purchase Tensor Processing Units (TPUs) from Alphabet's Google. Those will then be leased to Anthropic. Through this structure, Anthropic will keep the hardware off its balance sheet. This will be a useful financial tool as Anthropic prepares for its initial public offering. Those TPUs will be deployed in data centers starting sometime this year and will expand Anthropic's compute capacity by 1 gigawatt (GW).
Broadcom is also an integral part of the deal and is providing a crucial credit endorsement through residual value guarantees for $30 billion in debt tranches. Apollo's Atlas SP Partners contributed an additional $800 million in equity.
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Broadcom CEO Hock Tan explained that the company is building an "AI XPV platform" with Apollo, Blackstone, and other top investors to deploy over 20 GW of compute through 2028 for both Anthropic and OpenAI.
This isn't a great deal for Nvidia. The entire agreement is built on Google TPUs, not Nvidia's GPUs. Anthropic is deepening its relationship with Google. Will this ruin Nvidia's dominance? Absolutely not, but it does carve out space for another winner.
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Micron, on the other hand, could benefit tremendously. Regardless of which company's accelerators are providing the computing capacity, AI data centers can't operate effectively without scads of high-bandwidth memory. Micron is one of just three companies that can make it at scale. As the GPU versus TPU debate continues, Micron won't have to pick a side. It will supply memory to both. As such, this deal should be yet another boon for Micron's shareholders.
The AI build-out will require an additional $1.5 trillion in outside financing through 2028, according to Morgan Stanley. Private credit will undoubtedly play a major role. This Apollo and Blackstone deal is just the beginning and truly a template for what is to come in terms of innovative deal structures. Investors in companies such as Nvidia and Micron should take away two things: Competition among semiconductor companies is intense, and the demand for memory is only increasing.