D.A. Davidson upgrades Broadcom as Anthropic IPO bolsters AI spending outlook

D.A. Davidson upgraded Broadcom to buy from neutral on October 27 and raised its price target to $400 from $350. The catalyst was Anthropic’s IPO filing: analyst Gil Luria argues that fresh capital for AI developers would help fund the hardware purchases behind Broadcom’s forecasts. That is a bet on future financing and spending—not a completed payoff.

The new target implied nearly 22% upside from Broadcom’s October 26 close, CNBC reported. Anthropic filed its public S-1 registration statement with the SEC that day and plans to list on Nasdaq under ANT. The filing advances a proposed offering; Luria’s investment case still depends on the capital raising going ahead.

How the money reaches Broadcom’s hardware

There is already a concrete financing arrangement behind part of the spending outlook. On October 26, Bank of America, Blackstone, Citi and Morgan Stanley announced committed financing for a $63 billion transaction using Broadcom technology for Anthropic. Broadcom’s announcement says deliveries are expected to start in calendar 2027, placing the equipment build-out ahead rather than in completed results.

The structure puts a newly formed special purpose vehicle between the financial firms, the equipment supplier and Anthropic. The vehicle will purchase Broadcom’s XPU AI accelerators and networking equipment, then lease those assets to Anthropic. The announced amount therefore finances equipment for lease, rather than representing an equity investment in the AI developer.

Wolfe Research analyst Chris Caso sees that financing as a reason to trust the purchase outlook. In a note cited by CNBC, he argued that funding for Anthropic’s 2027 Broadcom purchases makes those orders highly likely to proceed. He also viewed the ability to finance purchases of this size as support for bullish supply-chain forecasts.

The upgrade assumes more capital will follow

Luria’s thesis goes beyond the announced equipment financing. He expects Anthropic to complete its IPO and raise capital, followed by an OpenAI IPO next year. Those are his expectations, not completed offerings. Together, he argues, the capital raises would allow Broadcom to meet its expectations for the next couple of years.

His valuation argument is that Broadcom’s share price gives too little credit to that outcome. At about 16 times estimated 2027 earnings per share, Luria said, the stock trades as though the chances of both deals happening are near zero. The upside he identifies is conditional on those deals materializing, rather than a return implied by the price target alone.

Raymond James analyst Simon Leopold offered a specific capacity forecast: another 5 gigawatts of Anthropic TPU8i capacity in fiscal 2027 and an incremental 10 gigawatts in fiscal 2028. He expects Anthropic to become Broadcom’s largest XPU customer in fiscal 2027. These projections describe the potential scale of the relationship, not computing capacity already delivered.

Broadcom also bears financing risk

The supplier is not simply selling hardware while financial firms take all the exposure. Broadcom says it will provide residual-value support to the vehicle equal to the first-lien, or senior, portion of the financing. Bank of America, Citi and Morgan Stanley are arranging that portion; Blackstone is the sole provider of the committed second-lien financing.

CNBC also reported that Anthropic disclosed plans earlier in October to borrow up to $42 billion from Broadcom for AI infrastructure. Leopold highlighted that potential commitment as a less appreciated financial exposure, while noting it could be transferred to a financial partner.

The upgrade joins an already bullish analyst consensus: 48 of 51 analysts rated Broadcom buy or strong buy, according to LSEG data cited by CNBC. Shares rose more than 3% in October 27 premarket trading, though they remained down nearly 5% for the year.