Broadcom CEO says many AI investors are gamblers

Investing.com -- Broadcom Inc. Chief Executive Officer Hock Tan said Monday that the artificial intelligence boom has drawn investors who approach the sector like gamblers and often lack proper understanding of their investments.

Speaking at an event in Singapore, Tan said many investors set extreme expectations without grasping what they are backing, particularly regarding large language models. He compared the situation to being in a casino.

The chip industry executive also addressed concerns about businesses spending money on AI without clear returns. He used an analogy of children wasting tokens at video arcades to describe how enterprises currently experiment with AI technology.

"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."

AI companies including ChatGPT-maker OpenAI are reporting billions of dollars in losses as the industry works to establish sustainable business models. The sector requires large investments in advanced chips, data centers and model development.

Tan noted that OpenAI reached annualized revenue of $50 billion in September, which suggests a viable business model exists. He added that the company continues to lose money due to high training costs.

"So frankly, it doesn't tell anything at this point except that there is a lot of potential revenue growth out of providing frontier generative AI models," Tan said.

The Broadcom chief warned that insufficient capital could become the next constraint on industry growth. Australian data center company Firmus Grid Ltd., backed by Nvidia Corp., withdrew its planned $5.5 billion initial public offering last week.

Before Tan spoke, DBS Group Holdings Ltd. CEO Tan Su Shan said the market is repricing risks on AI financing following heavy investment.

Intel Corp. CEO Lip-Bu Tan, who joined the panel discussion, said hardware will remain in short supply for the next two to three years due to rapid AI buildout. He said the memory chip market segment could be among the first to lose momentum.

Original Article

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