Broadcom Called AI Investment a 'Gamble,' Yet the Casino Is How It Makes Money

The CEO criticized them for harboring excessive expectations and not even knowing what they're investing in.

The CEO went further by questioning the long-term competitiveness of cash-burning AI labs, warning that capital shortage could become a constraint on the market.

This statement signals that the market is beginning to reassess funding-related risks following two years of massive capital flowing into AI firms.

An Intel executive said hardware supply shortages will persist for the next 2-3 years, and simultaneously, the funds to purchase those chips will also be insufficient.

After massive investment over two years, the market as a whole is reassessing risks related to AI funding.

Instead, it shifted to private market fundraising, showing that public market investors are becoming cautious about AI firm financing.

OpenAI is a Broadcom customer while also receiving Broadcom funding. OpenAI is expected to reach $50 billion in annual revenue as of September but is operating at a loss because it spends too much on training compute.

Broadcom directly provides OpenAI the funds to purchase Broadcom chips. The two companies are negotiating over $50 billion in chip financing, with Bloomberg estimating it at close to $30 billion.

Broadcom is also involved in a $60 billion co-investment in Anthropic. While the CEO questions the business model of AI labs, he faces his own position as the largest funder of that very business model.

Broadcom is investing $35 billion in the BigSky platform it established in April and June, and $300 million in a special purpose vehicle.

These investments fill AI labs' funding gaps while creating a structure where Broadcom secures guaranteed chip sales to them.

Broadcom's CEO questions the business model of AI labs while simultaneously lending them the most funding.

This means Broadcom itself recognizes the AI industry's unsustainability while completely depending on that industry for its own business.

Based on this, Jefferies warned that massive capital destruction is underway. Particularly, risks are concentrated in an asymmetric structure where equity holders gain and debt holders lose.

Broadcom's reality of needing to continuously draw money from capital markets directly contradicts the CEO's statements. Without the funds from the 'gamblers' the CEO himself acknowledged, the entire semiconductor industry cannot function.

JP Morgan's marketing team is maintaining prior tactical strength forecasts for semiconductors ahead of earnings reports.

However, credit default swaps are hitting all-time highs. The assessment that 'capital, not chips,' is the next bottleneck—as Broadcom's CEO claimed—is being reflected in credit markets, contradicting the optimistic view.

These two companies' results are expected to most directly show the current state of the semiconductor industry.

High utilization in key processes supports TSMC's pricing power and adequately helps cover 2-nanometer production expansion and foundry construction costs.

If AI and high-performance chip demand continues, 5nm and below processes will likely sell out. This means TSMC can maintain room for price increases for some time.

In the chart, the red demand line remains well above the blue supply line, showing a persistent shortage.

As long as this supply shortage continues, foundries like TSMC and Samsung will retain pricing power.

In the S&P 500, only semiconductors and semiconductor equipment are posting declines. Financials, healthcare, energy, utilities, and consumer defensive stocks are all rising.

This means the market is questioning the fundamentals of the semiconductor industry while moving money into defensive sectors. It signals the market is reassessing risks in semiconductor investment.

If it fails to recover into the range within a day of the breakout, the downtrend is likely to continue.

If the previous low of 227,000 won breaks, further declines are a concern, though a sharp drop to 200,000 won is not currently expected.

Interest rate stabilization signals are being viewed positively by markets. Risk assets are seeing continued inflows, with Bitcoin rising to the 83,000-dollar range.

Nominal GDP growth in the second quarter reached 6.3%. This growth pace is being maintained despite interest rates rising sharply from 4.5% to 5.25%.

The current interest rate level is neither high enough nor fast enough to cause serious economic damage. What bond markets are reflecting is not economic weakness but economic strength.

Concern about rate hikes would only be necessary if growth continues to accelerate toward 5-6% with a sharp upward trajectory.

President Donald Trump is known to plan to revisit or continue engagement with Iran after midterms. There is potential for this to affect oil passing through the Strait of Hormuz.

There are also reports indicating Iranian plots to carry out bomb attacks in Britain. The most likely current scenario is that oil prices remain at elevated levels around $100 a barrel for some time.

However, global energy dependence has declined compared to the past, so the economic impact of oil price increases is expected to be less severe than in previous periods.