$AVGO · Broadcom Inc.

Broadcom filed a Form 8-K reporting that on October 26, 2026, it arranged for financial partners to take on a portion of certain agreements to purchase AI racks based on custom AI accelerators designed by the company, together with related lease agreements with its customer for deploying compute capacity.

In connection with this arrangement, Broadcom is providing residual value support through a newly formed special purpose vehicle referred to as the “Backstop.” This is a contingent liability that Broadcom believes has a low probability of being triggered, based on the expected profitability of the customer and the sustaining value of the underlying assets. The total amount of the Backstop increases as the AI racks are delivered and deployed and decreases as the customer makes lease payments.

If the customer defaults on the lease, Broadcom’s remedies would include assuming the lease, reselling the AI racks back to the seller at a fixed price under certain conditions, or arranging a sale of the racks. Broadcom’s potential liability would be the difference between 72.5% of the outstanding lease amounts and the value of the AI racks received upon sale. The maximum potential liability upon deployment of the AI racks, on an undiscounted basis, is approximately $43 billion.