The AI Debt Scare Is Getting BiggerBy Joel Litman, chief investment officer, Altimetry
 Artificial intelligence needs money to fund its build-out...
And chipmakers are increasingly helping to foot the bill. One leader, Broadcom (AVGO), is now at the center of this trend. The semiconductor company is in talks with lenders to raise more than $60 billion in debt to help finance AI chips that companies like Anthropic could use. Broadcom may provide financial support for part of the deal. That comes after another huge commitment earlier this year... Broadcom agreed to support most of a $35 billion financing deal to help fund custom chips that would ultimately be leased to Anthropic. Credit investors have taken notice... During August, the yield on Broadcom's corporate bonds maturing in 2031 increased by about 14 basis points. That means investors demanded slightly higher interest rates to lend money to Broadcom. At the same time, the cost of five-year credit default swap ("CDS") protection rose by 28 basis points. CDS protection works much like insurance on a borrower's debt... A higher price signals that investors want more compensation for taking credit risk. However, these market signals don't necessarily mean Broadcom is in financial trouble. As we'll explain today, Broadcom's cash generation still points to a much stronger credit profile than most investors believe. The AI financing chain reaches far beyond traditional debt...And now the credit market is concerned about the growing web of financial commitments supporting AI infrastructure. See, chipmakers can help customers borrow money by promising to step in if those customers can't make their payments. These promises may not look like debt at first, but they could eventually require chipmakers to spend their own cash. That matters during an industry downturn.
A customer that can no longer borrow the money it needs could push part of the burden back toward the semiconductor company providing the guarantee on the payments. If several customers come under pressure at the same time, those obligations can pile up. JPMorgan Chase (JPM) has warned that these kinds of commitments are creating a hidden layer of financial risk across the AI ecosystem. That explains why bond investors are worried about Broadcom, at least in theory... But debt commitments tell us only part of the credit story...What really matters is whether a company is able to handle these commitments. That depends on the cash it generates relative to the payments it must make. This is where our Credit Cash Flow Prime ("CCFP") analysis comes in. The CCFP gives us a more accurate sense of a company's overall health. It compares financial obligations with cash position and expected cash earnings. In the following chart, the stacked bars represent Broadcom's obligations through 2030. This is what it needs to pay to keep the lights on... and prevent the company from collapsing. We then compare these obligations with Broadcom's cash flow (the blue line) and cash on hand at the beginning of each period (the blue dots). As you can see, Broadcom will have no problem covering its obligations. As soon as next year, its Uniform earnings are expected to surpass $100 billion, while its total costs are a fraction of that. 
Broadcom's credit risk is considered to be the third-highest among Big Tech companies... only behind SpaceX (SPCX) and Oracle (ORCL). But its CCFP shows that it has plenty of cash coming in, so it can weather any potential storms. Credit fear is running away from reality...For Broadcom, and much of Big Tech, there's still plenty of breathing room before credit risk becomes a serious problem. The bond market is reacting to the sheer scale of AI financing right now. But as we showed, Broadcom has enough cash on hand and flowing in from sales to comfortably cover what it owes. Rising bond yields and CDS spreads are worth watching because they show where credit investors are getting nervous. However, the more important signal will be whether Broadcom's financing commitments begin growing faster than its ability to generate cash. Until then, the recent move in credit markets looks more like investors being a little more cautious about Broadcom than a sign that the company's financials are in trouble. If you're invested in the company today, you can stay focused on the AI opportunity without worrying about a balance-sheet crisis. Regards, Joel Litman
September 15, 2026
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