Broadcom CEO sees viable OpenAI business but warns of AI funding constraints

Broadcom (AVGO) CEO Hock Tan said OpenAI’s (OPENAI) $50B annualized revenue as of September points to a viable business, but the chipmaker’s close ties to the AI startup raise questions about the sustainability of AI demand and the financing behind it.

Speaking at an event in Singapore, Tan said OpenAI (OPENAI) remains unprofitable because of heavy spending on model training and computing, adding that its revenue run rate offers limited insight into long-term profitability.

"Your parents give you $10 of tokens, you finish it in 10 minutes and you haven't learned anything," Tan said. "That's what happening in enterprises today."

Broadcom’s (AVGO) role in supplying custom AI chips to OpenAI (OPENAI), alongside financing arrangements supporting AI infrastructure purchases, has drawn attention to the links between chip demand and customer funding.

At the same time, the cost of insuring Broadcom’s (AVGO) debt against default has reportedly reached a record high, pointing to increased investor concern about its credit risk.