Broadcom CEO Hock Tan has projected that artificial intelligence could expand the global economy by $10 trillion annually. This forecast came as the semiconductor company announced a significant new partnership with OpenAI to develop custom AI hardware, a move that sent Broadcom's stock price soaring.
In an interview, Tan explained that AI has the potential to dramatically increase the contribution of knowledge-based industries to the world's economic output. The partnership with OpenAI is designed to build the large-scale infrastructure needed to power this technological shift.
Key Takeaways
- Broadcom's CEO predicts generative AI could increase the technology sector's share of global GDP from 30% to 40%, representing a $10 trillion annual expansion.
- Broadcom and OpenAI have formed a partnership to build and deploy 10 gigawatts of custom artificial intelligence accelerators.
- Following the announcement, Broadcom's stock surged nearly 10%, contributing to a year-to-date gain of over 53%.
- The company confirmed it is working with seven major players in the AI space and has secured $10 billion in chip orders from a fourth large, unnamed cloud customer.
AI's Potential Economic Impact
According to Broadcom CEO Hock Tan, the integration of artificial intelligence across various sectors could lead to a substantial expansion of the global economy. He based his projection on the current global Gross Domestic Product (GDP), which stands at approximately $110 trillion.
Tan noted that industries considered "knowledge-based, technology-intensive" currently account for about 30% of this total. He believes the widespread adoption of generative AI will significantly broaden the scope of these industries.
By the Numbers
Hock Tan's calculation suggests that if AI grows the technology-intensive share of the economy from 30% to 40% of the current $110 trillion global GDP, it would result in a $10 trillion annual increase in economic value.
"And you put in generative AI, you create intelligence in a lot of other aspects of society," Tan stated. "That 30% say will grow to 40% of all GDP. That’s $10 trillion a year." This growth would benefit not only AI-focused companies but also the entire ecosystem of hardware manufacturers, software developers, and related service providers.
New Partnership with OpenAI
Coinciding with the economic forecast, Broadcom and OpenAI officially announced a partnership to advance AI infrastructure. The collaboration is focused on jointly building and deploying 10 gigawatts of custom AI accelerators. This initiative is a critical step in scaling the computational power required for developing and running sophisticated AI models.
The deal highlights a growing trend of expensive, high-stakes partnerships among major technology companies aiming to secure a leading position in the AI race. Tan praised OpenAI's role in the industry, underscoring the strategic importance of the collaboration.
"[OpenAI is] one of those few players in the forefront of creating foundation models," Hock Tan said, acknowledging the ChatGPT maker's significant influence in the field.
This partnership provides Broadcom with a key role in building the foundational hardware for one of the world's most prominent AI research and deployment companies. For OpenAI, it secures a supply of specialized chips tailored to its demanding computational needs.
Market Reacts to AI Strategy
Investors responded positively to the news of the OpenAI partnership and Broadcom's clear focus on the AI sector. On the day of the announcement, Broadcom's shares climbed 9.88% by the close of the market. This single-day surge is part of a larger upward trend for the company's stock, which has increased by 53.86% so far this year.
The strong market performance reflects growing confidence in Broadcom's ability to capitalize on the AI boom. The company manufactures essential components, including chips and networking equipment, that are in high demand from hyperscalers and other large technology firms building out their AI capabilities.
Broadcom's Position in the AI Market
Broadcom is a key supplier of networking and custom silicon solutions. Its products are crucial for building the high-speed, interconnected systems that power large data centers. As AI models become more complex, the demand for Broadcom's specialized hardware is expected to grow significantly.
Broadcom's Expanding Customer Base
While the OpenAI deal is a major public development, Tan revealed that Broadcom's AI strategy is much broader. The company is actively working with a small, select group of influential players in the AI space. Tan mentioned that Broadcom is engaged with "about seven players," with four of them being what he termed "real customers."
He defined these customers as entities "who have given us production purchase orders at scale." This indicates that a significant portion of Broadcom's AI business is already secured through large-scale, long-term commitments.
Earlier this year, the company disclosed it was developing new AI chips for three large cloud customers. More recently, management announced it had secured $10 billion in chip orders from a fourth, unnamed client, demonstrating the massive scale of investment in AI hardware.
Tan expressed confidence in these relationships, emphasizing the immense computational requirements for companies competing to build the world's leading foundation models. "Each of these guys need a lot of compute capacity for them to basically play in this game and eventually win this game of creating the best foundation model in the world," he concluded.