Broadcom $AVGO Eyes $100B AI Debt Deal Nobody Saw Coming

$AVGO is out here doing things that would make even a Wall Street veteran spill their coffee. According to Bloomberg, Broadcom is pursuing a deal to backstop $60-70 billion in senior secured debt, with Blackstone and Apollo throwing in another $30 billion in junior financing, for a total that could hit $100 billion in AI infrastructure capacity. For context, that is bigger than the GDP of some countries. Multiple countries.

This is a direct extension of the June partnership between Broadcom, Blackstone, and Apollo, but on a completely different scale. The earlier deal covered 1 gigawatt of AI compute capacity. The new one targets 20 gigawatts. CEO Hock Tan has built a reputation for financial engineering that borders on performance art, and this is the magnum opus. The bull case writes itself: if AI infrastructure demand holds, locking in 20GW of compute capacity at today's debt costs looks like generational positioning. The bear case is equally obvious: $100 billion in debt is a lot of leverage on a technology cycle that could shift faster than anyone expects.

Meanwhile, the market's stealth winner on a very ugly Thursday was $ROST. Ross Stores beat Q2 estimates with EPS of $2.60 versus $1.56 a year ago, posted net sales of $6.26 billion against a $6.16 billion estimate, and raised its Q3 and Q4 outlook. Shares jumped 27% year to date as a result. Nobody on financial Twitter was talking about Ross. Everyone was talking about Walmart falling 9%. Classic misdirection play by the discount retail sector.

The broader market backdrop for all of this: the Dow dropped 686 points (1.3%) on Thursday, the S&P slid 0.9%, and the 30-year Treasury yield ticked up another 5 basis points toward 5.25%. JP Morgan's fixed income team pointed to uncertainty around new Fed Chair Kevin Warsh's reaction function as a key driver of elevated term premium. Translation: nobody knows what the new Fed chair will do when things get weird, and things are currently very weird.

The Broadcom megadeal is either the smartest trade of the decade or the most spectacular leveraged bet since the 2006 housing boom. The difference this time is that the underlying product, AI compute, has actual demand behind it. Sixteen major Micron customers signed take-or-pay agreements with $22 billion in cash deposits through 2030, which tells you something about how serious enterprise buyers are about locking in infrastructure capacity right now.

Ross Stores keeps quietly doing what Ross Stores does: selling brand-name stuff cheap to people who are stressed about gas prices, while everyone overlooks it in favor of the drama. The consumer is clearly under pressure, but somebody is still buying discounted Calvin Klein at 9pm on a Tuesday.