Jim Cramer Says Nvidia Would Face Media Backlash Over Broadcom's Deal

Jim Cramer Highlights a Double Standard in AI Chip Deals

CNBC Mad Money host Jim Cramer recently shared a strong opinion on social media about big-money artificial intelligence financing. He called a massive $63 billion arrangement between chipmaker Broadcom and AI startup Anthropic an excellent move for everyone involved.

However, Cramer pointed out what he views as a clear double standard in financial news coverage. He argued that if Nvidia were to sign the exact same financing structure, media outlets would criticize the company endlessly.

I think this broadcom deal is excellent for all involved but the press would never stop hectoring Nvidia if it did this deal

To understand Cramer's point, we need to look under the hood of how this complex deal works. We also need to examine why major chipmakers are taking on financial risks to build out AI infrastructure.

Breaking Down the $63 Billion Broadcom-Anthropic Structure

The financing arrangement came together over several weeks before Wall Street lenders announced it on Monday, according to Bloomberg. The major financial institutions involved include Bank of America, Blackstone, Citigroup, and Morgan Stanley.

Instead of Anthropic buying hardware directly from Broadcom, the money flows through a Special Purpose Vehicle (SPV). An SPV is a separate legal entity created specifically to hold assets and manage financing for a single transaction.

• Funding: Wall Street lenders pay money into the Special Purpose Vehicle.
• Purchasing: The SPV buys Broadcom AI chips and data center equipment.
• Leasing: The SPV leases that hardware to Anthropic so the AI firm can train its models.
• Repayment: Anthropic pays lease fees to the SPV to service the debt.

Where the Financial Risks Lie for Broadcom Shareholders

While this structure helps Anthropic access hardware without massive upfront capital, it exposes Broadcom to significant financial liabilities. Broadcom agreed to provide residual value support to the lenders backing the deal.

Residual value support means Broadcom promises to cover part of the losses if the hardware is worth less than expected when the leases end. If used AI hardware depreciates rapidly, Broadcom must pay the difference to lenders.

This setup carries extra risk because Anthropic currently holds a junk credit rating, sitting one notch below investment grade. If Anthropic struggles to pay its leases, Broadcom shareholders shoulder that default risk.

This deal comes shortly after an earlier financial commitment. Reuters reported on October 1 that Broadcom agreed to lend Anthropic up to $42 billion, referencing Anthropic's IPO prospectus. Neither report clarifies how that original $42 billion pledge relates to the new $63 billion bank-backed package.

Why Would Nvidia Face Harsher Scrutiny?

Why does Cramer believe Nvidia would face harsher headlines than Broadcom? The distinction lies in their business models and recent market history regarding circular financing.

Broadcom primarily designs custom AI chips for specific clients, such as Google's Tensor Processing Units (TPUs). By contrast, Nvidia sells standard graphics processing units (GPUs) to a broad global customer base.

Nvidia has already drawn media scrutiny over vendor financing. Nvidia shares fell in August after reports surfaced of a potential $500 billion Wall Street AI deal, as critics flagged concerns over circular financing.

Circular financing occurs when a supplier funds a customer, who then uses those borrowed funds to buy the supplier's products. Critics argue this practice blurs true market demand for hardware. That same month, Nvidia agreed to guarantee up to $105 billion in OpenAI data center leases.

Broadcom Is Not Completely Exempt From Scrutiny

Despite Cramer's view that Broadcom gets easier treatment from the press, commentators note Broadcom faces similar critiques. Anthropic relies on funding from a web of major tech companies that also supply its infrastructure.

• Broadcom supplies custom chips and guarantees hardware residual value.
• Amazon has invested billions in Anthropic while providing cloud services.
• Google holds equity stakes in Anthropic and supplies hardware access.
• Microsoft maintains extensive partnerships across major AI laboratories.

Because Anthropic gets cash from tech giants and turns around to buy their services, part of the money flows back to its backers. This means Broadcom is not entirely separate from circular financing concerns.

The Growing Trend of Chipmakers Acting as Lenders

The Broadcom-Anthropic deal underscores a growing trend in the tech industry. AI laboratories require more high-end hardware than they can afford to buy upfront. As a result, chip manufacturers increasingly act as lenders and guarantors.

These financing challenges are not new to the market. Back in May, OpenAI reportedly hit a chip financing snag tied to its own partnership with Broadcom.

While vendor financing keeps AI hardware expanding quickly, it also ties chip manufacturers' stock performance directly to the credit quality of AI startups. Investors should note that while these arrangements drive immediate hardware sales, they also introduce balance sheet risks if customer revenue falls short.