Nvidia and Broadcom AI financing deals raise long-term concerns, Wolfe Research comments

Investing.com -- Nvidia and Broadcom have announced large financing initiatives for AI infrastructure that point to strong near-term demand but create potential long-term risks for both companies, according to Wolfe Research.

Nvidia (NASDAQ: NVDA) established a compute financing platform with Blackrock, Blackstone, Brookfield, Goldman Sachs, and KKR targeting more than $500 billion of third-party capital for AI infrastructure development. Nvidia CEO Jensen Huang said on X that the company has the option to backstop up to $125 billion, or 25% of the potential deals.

Broadcom (NASDAQ: AVGO) recently announced an XPV financing vehicle with Apollo and Blackstone for XPU purchases by Anthropic and OpenAI. The platform will enable more than 20GW in compute capacity through 2028, with an initial $35 billion tranche for 1GW of Anthropic capacity for mid-2026. Broadcom is providing residual value guarantees worth $30 billion for the $36 billion tranche.

For Broadcom, the 20GW of XPV financing would amount to 14GW of capacity for OpenAI and Anthropic in 2028. At $10-15 billion per GW, that would suggest $140-200 billion in revenue from those two customers, compared to about $245 billion of total consensus revenue for Broadcom in 2028.

For Nvidia, assuming the company captures about 70% of spending in a Nvidia-powered data center, the stated financing would deliver $350 billion in Nvidia revenue if completed. That equals nearly all of Nvidia's fiscal 2027 $393 billion consensus revenue and about 60% of fiscal 2028 $565 billion consensus revenue.

Wolfe Research noted that token costs and occupancy rates for legacy hardware have remained high even as new hardware has become available. Nvidia's Ampere platform, released six years ago, remains fully utilized with resilient token pricing.

The firm expressed concern about what happens when supply and demand normalize or the industry overbuilds capacity. The backstops provided by Nvidia and Broadcom represent a form of reinsurance that will carry low risk if individual companies fail, but higher risk if the AI industry as a whole faces oversupply.

Wolfe Research does not expect supply to exceed demand soon due to physical constraints in creating clean room capacity. The firm's analysis suggests both TSMC and DRAM supply will likely remain tight through 2028.

Nvidia trades at 18 times consensus 2027 earnings per share while Broadcom trades at 20 times, according to Wolfe Research.

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