Hock Tan, Broadcom’s chief executive, likened enterprise spending on artificial intelligence to children racing through arcade credits. “When you are a kid you go to a video arcade, you play. Your parents give you $10 of tokens, you finish it in 10 minutes and you haven't learned anything. That's what happening in enterprises today,” he said at the DBS Asia Future Forward Conference in Singapore on Monday.
His warning is best read as a challenge to the financing model behind the AI buildout. Tan said “A lot of investors have no clue what they are investing in” and that they “set very extreme expectations only to find out that it's almost like they are in a casino”.
“What I think might be the biggest constraint is capital,” Tan said.
Lip-Bu Tan, Intel’s chief executive, made the same case at the conference. “If there's any challenge in the front, it's capital and the cost of capital, and then the other part is in the longer run, people want to see the ROI,” he said.
The two executives said financing could be harder to address than shortages of semiconductors, memory or power. Tan Su Shan, chief executive of DBS Group Holdings Ltd., said the market was repricing the risks tied to AI financing.
The concern comes while demand for computing capacity remains ahead of what the industry can supply. Hock Tan said that gap could continue through 2029 and potentially into 2030. He projected AI semiconductor revenue of $115 billion in fiscal 2027, followed by $230 billion in fiscal 2028.
Yet the business case for the infrastructure is still under pressure. OpenAI’s annualized revenue reached $50 billion in September, while Hock Tan said it was still losing money because of the sums it was spending on training. Firmus Grid Ltd., an Australian data center company with Nvidia backing, pulled its planned $5.5 billion initial public offering last week.
Broadcom is itself pursuing substantial financing. The company is assembling $60 billion in debt funding, comprising a $42 billion senior-secured tranche being prepared by banks and an $18 billion junior debt tranche led by Blackstone. Under a lending commitment disclosed in Anthropic’s initial public offering prospectus, Broadcom agreed to lend Anthropic up to $42 billion for infrastructure spending. That amount could be converted into Anthropic equity.
Intel has also turned to investors to finance an expansion of its chip contract manufacturing business. It increased a common stock offering to $20 billion in August, pricing 210,526,315 shares at $95 each. The company raised its 2026 capital expenditure target to $20 billion from $18 billion in July. Intel has committed to high-volume production using its 14A process node by 2028.
For both companies, the central issue is whether customers and investors will continue to finance the capacity now being built. Hock Tan said infrastructure spending could slow if adoption of leading AI models fails to meet expectations or if improvements in their capabilities begin to level off.
Lip-Bu Tan said businesses would need to demonstrate tangible returns through greater efficiency and new business models. Hock Tan cautioned that a shortage of capital could become the next constraint on the industry’s expansion.
Comments (0)