OpenAI-Broadcom Agreement Sends Shares of Chipmaker Soaring

Mandeep Singh, Bloomberg Intelligence Senior Tech Industry Analyst discusses OpenAI's agreement with Broadcom Inc. to collaborate on custom chips and networking equipment.

Broadcom Inc. shares jumped after OpenAI agreed to buy the company’s custom chips and networking equipment in a multiyear deal, part of an ambitious plan by the startup to add artificial intelligence infrastructure.

As part of the pact, OpenAI will design the hardware and work with Broadcom to develop it, according to a joint statement on Monday. The plan is to add 10 gigawatts’ worth of AI data center capacity, with the companies beginning to deploy racks of servers containing the gear in the second half of 2026.

By customizing the processors, OpenAI said it will be able to embed what it has learned from developing AI models and services “directly into the hardware, unlocking new levels of capability and intelligence.” The hardware rollout should be completed by the end of 2029, according to the companies.

For Broadcom, the move provides deeper access to the booming AI market. Monday’s agreement confirms an arrangement that Broadcom Chief Executive Officer Hock Tan had hinted at during an earnings conference call last month.

Investors sent Broadcom shares up as as much as 11% on Monday, betting that the OpenAI alliance will generate hundreds of billions of dollars in new revenue for the chipmaker. But the details of how OpenAI will pay for the equipment aren’t spelled out. While the AI startup has shown it can easily raise funding from investors, it’s burning through wads of cash and doesn’t expect to be cash-flow positive until around the end of this decade.

OpenAI, the creator of ChatGPT, has inked a number of blockbuster deals this year, aiming to ease constraints on computing power. Nvidia Corp., whose chips handle the majority of AI work, said last month that it will invest as much as $100 billion in OpenAI to support new infrastructure — with a goal of at least 10 GW of capacity. And just last week, OpenAI announced a pact to deploy 6 GW of Advanced Micro Device Inc. processors over multiple years.

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