Sarah: Broadcom didn't put out a press release today — it put two numbers in an SEC filing.
Sarah: $164.6 billion in firm remaining performance obligations, and a $29 billion backstop on a customer's rack leases.
Sarah: This is The Data Center Daily.
Sarah: And that second number puts a chip supplier on the hook for the real estate, which is a long way from 'silicon vendor.'
Matt: Twenty-nine billion with Broadcom's name on it.
Matt: We've been asking for the signed contract all week — well, here's the deed condition.
Matt: Now I want to know who the investor partner actually is.
Sarah: We'll get there. Plus New York floating a freeze on large loads
Sarah: Memphis dangling a land clawback at xAI
Sarah: and a FERC step-back on who eats the transmission risk.
Sarah: Let's start with Broadcom.
Sarah: Here's the structure: Broadcom's exposure rises as the racks deploy and falls as the customer pays the lease.
Sarah: So Broadcom's risk peaks exactly when the buildout's only half full.
Matt: Which is the worst possible moment.
Matt: The racks are sitting there drawing power, the customer hasn't paid them down, and Broadcom's holding $29 billion if that customer blinks.
Matt: Who IS the customer?
Sarah: The filing calls it an investor-partner structure — doesn't name the hyperscaler.
Sarah: Which tells you Broadcom would rather disclose the dollar figure than the counterparty.
Matt: And what does that do to silicon pricing discipline?
Matt: You're the chip guy AND the landlord's guarantor — you can't squeeze the buyer on the accelerator when you also need their racks to fill.
Matt: That's a conflict baked right into the balance sheet.
Sarah: We started the week with Goldman asking whether the capital was adequate, then Jefferies pointing at the physical supply ceiling.
Sarah: Now the financing risk is sitting inside the chip vendor itself.
Sarah: The list of who's exposed keeps getting longer.
Matt: Remember OpenAI's $50 billion compute bill — a check written against a grid that can't cash it yet?
Matt: Now there's a second disclosed number, $164.6 billion in firm obligations, parked against the same unenergized capacity.
Sarah: Move to New York. There's a bill to temporarily freeze new data centers over 20 megawatts
Sarah: and it bundles infrastructure
Sarah: energy and water costs onto the facility itself.
Matt: All three cost streams in one bill — that's the first one I've seen do that.
Matt: Delaware did self-supply yesterday, Reno zoned them out in June.
Matt: New York just put the whole tab on the tenant.
Sarah: In one quarter, we've got an environmental hold, a cost-shift statute, and a zoning moratorium all converging on the same load class.
Sarah: That's starting to read like a regional cordon, not coincidence.
Matt: The catch is the bill targets DEC approval issuance, not queue position.
Matt: So anything already filed slides right through — same structural gap we hit with Seattle.
Matt: The teeth are in the water and energy provisions, not the freeze.
Sarah: And Memphis has actual teeth.
Sarah: The city's chief legal officer confirmed the land reverts if xAI doesn't finish the greywater facility — a deed condition with a deadline
Sarah: clock running.
Matt: That's the enforceable line I've been asking for.
Matt: A moratorium freezes the next guy; a reversion clause grabs the land back from the guy who already broke ground.
Matt: Memphis skipped the press-release version and put it in the deed.
Sarah: That brings us to the step-back: FERC and the RTOs are carving conditional fast-track paths for big loads
Sarah: with SPP's CHILLS tariff as the cleanest example.
Sarah: The fight is whether that externalizes interconnection costs onto everyone else.
Matt: And here's the piece nobody answers — when that temporary service sunsets and the load's still sitting there drawing power
Matt: who owns the stranded transmission the whole time?
Matt: It's not just the sunset clock.
Matt: It's the years in between.
Sarah: Right, and that same question is hanging over PJM: who pays for the upgrades the queue demands?
Sarah: The carve-out just makes it explicit instead of buried in a docket.
Matt: Ratepayers eat it. They always eat it.
Matt: The hyperscaler gets the fast path, the grid people get the bill, and Broadcom backstops the racks.
Matt: Everybody's holding something except the company that actually wanted the compute.
Sarah: Broadcom's latest 10-Q has a disclosure that changes how locked-in hyperscaler custom-silicon demand looks.
Sarah: Here's the language straight from the filing.
Quote: Certain multi-year customer contracts in our semiconductor solutions segment and infrastructure software segment
Quote: including contracts where customers do not have termination rights
Quote: contain firmly committed amounts and the remaining performance obligations under these contracts as of May 3
Quote: 2026 were approximately $ 164.6 billion.
Quote: These commitments include obligations under a long-term contract for custom AI accelerators entered in the fiscal quarter ended May 3
Quote: 2026 . We expect approximately 30 % of this amount to be recognized as revenue over the next 12 months.
Matt: Forget pipeline math or TAM slides — these are firm, non-cancellable obligations.
Matt: At this scale, a major hyperscaler has committed its custom accelerator roadmap to Broadcom for years, not quarters.
Sarah: Watch how quickly that 30-percent near-term tranche gets absorbed, and whether Broadcom's backlog keeps building.
Sarah: This obligation structure is now one of the clearest tells for XPU capacity planning across the ecosystem.
Sarah: Another line in Broadcom's latest 10-Q moves the company well beyond the usual fabless-chip box.
Sarah: Here's what they disclosed.
Quote: On June 8 2026
Quote: we arranged for an investor partner to take on certain agreements to purchase AI racks based on custom AI accelerators designed by us and
Quote: the related lease agreements with a customer that enable access to compute capacity.
Quote: In connection with the arrangement
Quote: we entered into a backstop agreement with the investor partner for the customer's lease obligations over 5-year terms.
Quote: The backstop will increase over time as the AI racks are deployed and decrease as the customer makes payments on its lease obligations
Quote: with a maximum exposure of $ 29 billion.
Quote: In the event of default by the customer
Quote: we have various remedies
Quote: including the assumption of the lease or effecting a sale of the AI racks
Quote: which would reduce our maximum exposure.
Matt: So Broadcom is selling silicon into this stack and sitting inside the capital structure.
Matt: They're carrying backstop exposure that scales with deployment, which gives this name a risk profile investors weren't pricing in.
Sarah: Watch how fast those racks deploy.
Sarah: That's what pushes Broadcom's contingent liability toward the $29 billion ceiling
Sarah: and any customer credit deterioration now hits Broadcom's balance sheet
Sarah: not just its backlog.
Matt: FERC and the RTOs are clearly in 'move fast' mode on data center load.
Matt: But when does a conditional, flexible-service carve-out turn into a way for large loads to push interconnection costs onto everyone else?
Sarah: This is the live fault line in every active docket right now.
Sarah: The clearest recent example is FERC approving SPP's non-firm large-load transmission service: a data center accepts curtailment rights in
Sarah: exchange for faster queue access and
Sarah: in theory less upgrade cost pushed onto the broader rate base.
Sarah: That's the fair version of the bargain — trade guaranteed delivery for speed.
Sarah: But RMI's point is that the design changes wildly across utilities and RTOs.
Sarah: Some jurisdictions have tariff safeguards that actually ring-fence upgrade costs; others basically don't.
Sarah: So the cost-shift risk is very local, not solved systemwide.
Sarah: Davis Graham's read of the regulatory arc from late 2024 through this spring is similar: FERC went from rejecting expedited data-center
Sarah: interconnection proposals outright to standing up active rulemakings.
Sarah: That shift happened fast, and the consumer-protection guardrails are being written alongside the access rules, not ahead of them.
Sarah: Orrick also flagged NERC's projection that data center load in several RTO footprints could grow by more than 120% by 2027.
Sarah: That makes the cost-allocation stakes on any upgrade decision vastly bigger than they were when these queue frameworks were designed.
Matt: So if the non-firm curtailment structure is the intended safeguard, what's the actual enforcement mechanism?
Matt: Who's watching whether a data center that accepted interruptible service is genuinely operating that way under grid stress?
Sarah: That's the enforcement gap practitioners keep pointing to.
Sarah: The tariff language can require curtailability, but the metering, telemetry, and penalties that make it real are still being defined.
Sarah: FERC's ongoing rulemaking for PJM, and the broader national framework, is where those teeth either get written in or they don't.
Sarah: Watch the compliance-filing deadlines from FERC's December 2025 order to PJM
Sarah: and watch whether other RTOs copy SPP's non-firm template with stronger load-performance obligations attached.
Sarah: That's the tell: does flexibility become a real reliability tool, or just a queue workaround with a curtailment label on it?
Sarah: From WREG:
Quote: But if they don’t, the city’s chief legal officer says they have protections in place that could see the land returned to city ownership.
Quote: “If they have not made substantial progress toward the completion of this facility within a year of May 14th
Quote: then we will take this land back,” Tannera Gibson
Quote: the city’s chief legal officer
Quote: told City Council members Tuesday.
Matt: Memphis put a deed-reversion clause on xAI.
Matt: The chief legal officer told the council: no substantial progress on the greywater facility within a year of May 14th
Matt: and the land goes back to the city.
Matt: That's a clawback with teeth.
Sarah: And the numbers are small enough to be concrete — roughly 13 acres
Sarah: about 820 grand sale agreement signed June 2025
Sarah: year of due diligence to start construction.
Sarah: It lives in the deed, not the press release.
Matt: And remember why this facility exists — it recycles greywater so xAI doesn't pump millions of gallons out of the city's aquifer.
Matt: They paused it in April to chase Colossus 2.
Matt: Cool the machine first, worry about the city's water later.
Sarah: Gibson says the city feels 'pretty positive' they'll finish.
Sarah: The clause is for when 'pretty positive' doesn't pan out.
Sarah: TechInformed writes:
Quote: New York lawmakers have passed the Responsible Data Center Development Act
Quote: a bill that would stop the state Department of Environmental Conservation from issuing new approvals for large data centers for one year.
Quote: The bill, S10642/A11560, cleared the Senate on June 4 by a 43-17 vote after the Assembly passed the same measure earlier that day.
Sarah: New York's Responsible Data Center Development Act cleared both chambers June 4 — Senate 43-17 — and now it's on Hochul's desk.
Sarah: One-year freeze on DEC approvals for anything pulling 20 megawatts or more.
Sarah: And it's more than a pause.
Sarah: The bill shifts infrastructure, energy AND water costs onto the large facilities.
Sarah: Delaware did the cost-internalization thing yesterday with its self-supply statute.
Sarah: Two states, two mechanisms, one week.
Matt: First bill I've seen this cycle that bundles all three — infrastructure, energy, water — into one cost stream the operator eats.
Matt: That's a template. Other states are watching this one.
Matt: And look at the carve-out — doesn't touch projects that already broke ground.
Matt: So the freeze hits the next guy in line, not the load that's already digging.
Matt: Same gap we flagged on Seattle: a moratorium can't reach an application already in the queue.
Sarah: The teeth here are different, though.
Sarah: DEC has 18 months to produce an impact report — electricity
Sarah: water wastewater farmland
Sarah: the works — with the bulk system operator at the table.
Sarah: It turns the freeze into a paper trail.
Host: If you follow the infrastructure behind AI, check out Musk v Altman Daily.
Host: It's a daily court-watch on Elon Musk’s trial against Sam Altman
Host: OpenAI and Microsoft
Host: covering testimony exhibits
Host: and the AGI governance fight.
Host: Find it wherever you listen to podcasts.
Host: You’ll find links to every story we covered today in the show notes
Host: so if one caught your attention
Host: that’s the place to dig in a little further.
Host: That’s The Data Center Daily for this Wednesday.
Host: This is a Lantern Podcast.