Broadcom Shares Rise as Much as 5% After DA Davidson Upgrade Citing Anthropic IPO Filing

Since Anthropic filed its S-1 on Monday, Oct. 26, and Bank of America, Citi, Morgan Stanley and Blackstone announced the $63 billion lease financing, Broadcom's stock has become the market's most direct way to bet on the deal. Shares climbed as much as 5% today, Oct. 27. As of 11:59 a.m. ET they traded at $342.15, up $12.98, or 3.94%.

The upgrade

DA Davidson analyst Gil Luria moved Broadcom (AVGO) to Buy from Neutral and raised his price target to $400 from $350. That is about 22% above Monday's close.

Luria told clients the filing convinced him Anthropic's IPO will go ahead. "Our reading of the Anthropic [IPO filing] leads us to believe the IPO will proceed, Anthropic will raise its capital, and next year OpenAI will raise more capital in its own IPO, allowing Broadcom to meet its expectations for the next couple of years," he wrote.

He added that at 16 times 2027 earnings per share, Broadcom "is trading as if the chances of that happening are near zero." His firm also says the AI cycle "isn't over quite yet."

What the filing shows

Anthropic plans to list on Nasdaq under the ticker "ANT." The S-1 describes Broadcom as both supplier and lessor of its AI computing equipment under a non-cancelable five-year lease. The lease involves roughly $125.2 billion in payments, excluding interest.

The compute is built on tensor processing units. Part of it comes online in 2026, with more slated to start in 2027. In April, Anthropic deposited cash into a restricted account for Broadcom's benefit to secure capacity.

The filing also lets Anthropic issue up to $42 billion in convertible promissory notes to Broadcom or a designated financing partner, if needed, to fund its obligations. Crypto Briefing, citing the filing, put the total value of Anthropic's agreements with Broadcom at $161.2 billion. It also reported that Anthropic disclosed $131 billion in cash and equivalents and gross margins of about 50%.

Under the SPV structure, Broadcom will provide residual-value support equal to the first-lien portion of the financing. Equipment deliveries are expected to begin in 2027.

Why the stock moved

Broadcom had slid to its lowest level since April last week, with the $320 level acting as support, according to Schaeffer's Investment Research. The stock remains well below its June 3 record of $495. Its 14-day relative strength index sat near 31, close to oversold territory, ahead of the bounce.

Broadcom's own numbers show how fast the AI business is growing. AI semiconductor revenue reached $16.7 billion in the fiscal third quarter, up 221% from a year earlier. The company's outlook calls for $21.7 billion in the fourth quarter. On its September earnings call, Broadcom said Anthropic is on track to become its largest custom accelerator customer in 2027.

Several other analysts weighed in. Raymond James analyst Simon Leopold said the filing "provides compelling support for the magnitude and longevity of this opportunity." William Blair's Sebastien Naji said he sees "an attractive risk/reward equation for the stock."

The exposure on the other side

The same Raymond James note flagged a downside. Leopold said Broadcom's potential $42 billion financing commitment, which may be transferred to a financial partner, "highlights a less appreciated financial exposure."

The lease terms add to that. Anthropic's obligations can accelerate on certain unresolved payment or performance defaults, according to the filing's terms as described by 24/7 Wall St. Broadcom's AI growth rides on a small number of large customers, so one buyer's funding matters a great deal.

The Wall Street Journal reported Monday that Broadcom CEO Hock Tan spent nearly two months working with banks to secure more than $40 billion in commitments. According to the Journal, some lenders considered withdrawing over concerns the returns did not compensate them for the risk. The paper says Tan held last-minute talks with bank executives and agreed to higher loan interest rates. Broadcom has not been quoted disputing that account.

Anthropic's cash position is also in the filing. The $131 billion in cash and equivalents that Crypto Briefing reported is the kind of balance that supports a customer's ability to keep paying suppliers. Luria pointed to figures like it as evidence that AI infrastructure spending looks set to continue.

What comes next

The $400 target rests on Anthropic completing its IPO, and on OpenAI following with one next year. A filed S-1 does not set a listing date or a valuation, and neither has been announced. The revenue Luria is pricing in starts with deliveries in 2027, so it is expected revenue, not booked revenue.

If the IPO proceeds, Anthropic's first public disclosures after listing will show whether the lease payments and the $42 billion note facility track the schedule laid out in the filing.