Broadcom’s $10B Mystery Customer Underscores Ballooning AI Investments

Looks like OpenAI’s not the only AI company flinging billions around like they’re shrimp at Benihana’s. 

Chip-maker Broadcom’s stock spiked in September when it announced a $10 billion deal with a new customer that analysts speculated was OpenAI. But yesterday, Broadcom’s president revealed its new high-roller is not the ChatGPT-parent without specifying exactly who is scooping up $10 billion worth of its semiconductors. Meanwhile, OpenAI and Broadcom have announced a partnership, as of yesterday, to co-develop 10 gigawatts of custom AI chips over the next four years.

Broadcom is tight-lipped about its client list, but analysts believe its three biggest customers are Google, Meta and TikTok-parent Bytedance. The fourth member of the squad remains a mystery, highlighting just how many tech companies are reaching deep into their pockets to invest in AI.

Huge AI-ppetite

Big Tech has spent $155 billion building and running AI systems this year through August, according to The Guardian, and has made deals to spend hundreds of billions more. OpenAI alone has committed more than $1 trillion in years-long deals with companies including AMD, Nvidia and Oracle. To pay for the massive investment in building AI, Bain & Co. analysts estimated that the industry needs to generate $2 trillion in revenue by 2030. To put that into perspective, OpenAI is expected to generate $13 billion this year. 

And AI spending won’t end with the upfront costs as tech companies scramble to secure the massive energy needed to run programs like Sora:

• AI uses as much as 20% of global data-center power, excluding bitcoin mining, the research journal Joule found, and that demand will probably double by the end of this year.
• CEO Sam Altman said he wants to ramp up to 250 gigawatts of computing power by 2033, according to The Wall Street Journal, which would cost $10 trillion today. 

Possible Obstacle: AI stocks including Broadcom’s have surged this year on AI hype. This week, AI investors will be closely watching President Donald Trump’s planned meeting with Chinese leader Xi Jinping. China expanded its restrictions on exports of rare-earth metals last week, prompting concern that chip production by companies like Taiwan-based TSMC could be affected. While Taiwanese officials said on Sunday that the specific rare earths targeted won’t directly impact the country’s semiconductor industry, critics say the materials are still crucial supplementary components of the chip-making process.