‘They are in a casino’: Broadcom is making billions off the AI boom, but CEO Hock Tan said many AI investors have ‘no clue’ what they’re investing in

Hyperscalers are pouring billions into data centers, and Broadcom , which designs custom AI chips for them, has been one of the biggest beneficiaries.

The company has generated about $68 billion in AI semiconductor revenue since late 2023, according to its earnings reports.

In its fiscal third quarter , which ended Aug.

2, AI semiconductor revenue more than tripled from a year earlier to $16.7 billion.

But on Monday, Broadcom’s CEO Hock Tan likened many of the investors drawn to the AI boom to gamblers and questioned the economics of AI labs as Wall Street debates whether the AI bubble will burst .

“A lot of investors have no clue what they are investing in,” he said at the DBS Asia Future Forward Conference in Singapore, according to Bloomberg .

He said they “set very extreme expectations only to find out that it’s almost like they are in a casino.” Broadcom supplies the hardware that frontier AI labs need to build their systems.

But while Broadcom can profit from selling chips, the AI labs buying computing power must still find enough paying customers to cover the cost of developing and running their models.

The challenge is to turn demand into sustainable revenue.

Tan acknowledged that OpenAI’s reported $50 billion in annualized revenue at the end of September points to a viable business model for AI labs, but said it doesn’t guarantee that they will be profitable.

Annualized revenue extrapolates a company’s current sales pace across a year.

It does not measure revenue collected over 12 months, and labs have expenses to cover.

OpenAI expects to spend over $25 billion on training alone this year.

“For now it’s still losing money because they’re spending a lot on training,” Tan said.