Broadcom CEO Warns AI Spending May Outpace Business Returns

Broadcom CEO Hock Tan warned that companies adopting generative artificial intelligence have yet to show whether the tools deliver enough productivity gains to justify their costs, while access to capital may limit the industry’s expansion.

At a Singapore conference on Oct. 12, Tan said some investors have high expectations for AI businesses without fully understanding the technology they are backing. He compared that behavior to gambling.

Tan also likened corporate AI spending to giving a child $10 in arcade tokens that are used up in 10 minutes without the child learning anything. The analogy reflected his concern that companies are consuming AI capacity without establishing a clear business return.

Tan said capital could become a larger constraint as chip and memory supply improves. Building data centers, purchasing computing equipment and training AI models still require substantial funding.

Intel CEO Lip-Bu Tan, who appeared with Hock Tan, said the cost of capital also matters as AI investment grows. Investors will eventually expect companies to show profits connected to their spending, he said. Lip-Bu Tan expects AI hardware supply to remain tight for the next two to three years.

Elon Musk responded to Hock Tan’s casino comparison: “No crying in the casino.”