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Well, this is a tough time to be in San Francisco, a day when the entire AI sector is taking a hit, as Anthropic and OpenAI, well, let's say, are scaling back their ambitions. I actually think there are some really good deals in this group. Take Broadcom, a manufacturer of chips , networking equipment, technical infrastructure, and software.
Well, the stock has fallen more than 10% in the last month. Earlier this month, Broadcom reported strong results and issued an impressive multi-year outlook , but its expectations for the current quarter were perceived by some as mediocre, and the stock plummeted. I think Broadcom is still on track for incredible growth as they are at the very center of the AI ecosystem.
Because the company has never let us down in all the years that my Capital Trust has owned it. And now, about 150 points below its June high , the stock may be too cheap to ignore. Don't take my word for it. Let's talk to the legendary Hock Tan, president and CEO of Broadcom. Mr. Tan, welcome back to Mad Money.
Glad to be here, Jim. So, you had an incredible prediction. It was so fantastic. $350 billion for the next two years, and you sounded very confident. Has anything happened in this discussion about AI slowing down that would make you doubt this prediction? No. Absolutely not. We see that the demand for computing infrastructure for AI development, advanced models, and inference for the products they deliver to the world remains very high, and I believe very sustainable.
Okay, you're also an expert in finance, and you've been able to engage some really great companies to create creative sources of funding. Do you need OpenAI or Anthropic to go public anytime soon? I know OpenAI is saying they're going to delay it to be sure, because I would be worried if they didn't do an IPO or had trouble with it that I might not get paid.
That's a valid question, and we have six clients. Only six, but they all create cutting-edge models, LLM as we know it. Because my point is that the real value from this phenomenon of generative AI and the computers that go with it comes from businesses that create their own advanced models. Of these six, two, OpenAI and Anthropic, are what I consider to be cash flow poor.
Of course. But they are highly regarded because they have great technology, and we create very high- quality products for them so that they can continue to improve the development of their advanced models. So, given their results, and they have proven to be very successful, especially OpenAI, we are creating a platform by attracting powerful financial partners.
Not traditional financial partners , but those who are ready to look at these companies in a new way: to assess the creditworthiness, opportunities and potential they have, and are now ready to provide them with credit. We just help them, create a platform, and companies like Apollo or Blackstone, who like these opportunities, get involved because the rates there are definitely better than on Treasury bonds.
And they create a certain confidence. You mean, if, say, OpenAI comes out and says, "Listen, we're not going to do an IPO." These two companies, which, by the way, I know, and they are very pragmatic, they are ready to lend. Certainly. That's right. We are finding that it is not at all difficult to find such financial partners who are ready to come and finance the infrastructure of these companies, even despite the huge demand from these two players in the coming years.
Perfectly. Now let's talk about last quarter. You, I was very worried, and we were telling the club members: look what Hock Tan says, the 27th and 28th years are going to be amazing. He always justified his predictions. If that's the case, I think it could be worth up to $20 per share in 2028. I know you said in your Communicopia speech that we will make a capital allocation decision in December, but if you know you will, tell people why they shouldn't buy the stock now.
Well, we were conservative in estimating the numbers for the 28th year . We claim that only on AI revenues—and these are specialized AI accelerators that we provide to our six clients, and the networking equipment that goes with them... We are a chip company. We sell the chips that go into infrastructure.
We believe that with these products alone we will reach 20-30 billion in 2028. That, plus our existing non- AI businesses— software and semiconductors—as I mentioned, will lead to earnings of over $30 per share in '28 . Oho. Not $20, but $30 per share. So, if that's the case, I mean, I would buy, you know, I would n't wait until December.
I would buy a huge amount of shares on the open market. That's exactly what I think. But we will earn our appreciation, Jim. Okay, because I think sometimes people don't look at the numbers. They just draw conclusions. Judgments should be based on numbers. There are some things you have taught me over the years of reading your conference calls.
Now you spoke quite harshly about Nvidia's product, although we know that Nvidia is a great company. Yes, that's right. that your Jalapeno Chip, you think, is very competitive compared to Grace Blackwell when it comes to withdrawals. Can you tell people that this is a bold assumption, knowing that everyone thinks Nvidia is untouchable?
No, this is... here's the most interesting part of all this, the technology. If you develop a silicon XPU together, we call it our client accelerator. Every turn of the transistor layout, you design the chip together with the advanced model developer, algorithm experts, data scientists who tell you what workloads they need.
Design it and you'll create a chip that meets their workload needs . Your chip will always perform much better than a general purpose GP. Of course. This is the basic premise of all this . Perfectly. Now let's talk about what happened this weekend. Dario Amodei wrote a thoughtful note, but at the same time, some may view it as self-serving.
If you make everyone stop and you're in the lead, like in a Formula 1 race, if you have a flag that says "slow down," then you win no matter what. Do you think there were strong arguments there, or is it more...Is it strong, or self-serving, or both? Well , I'll focus on the important points. There are several important points that are quite real.
One very important one is AI, generative AI, creating those advanced models that incorporate generative AI will create enormous value. Good. for us, for businesses, for people, for consumers , because it makes us smarter, more productive. So, it's a lot...it's like going back to the industrial revolution.
This is a phenomenon that is very similar to us having access to intelligence to be able to perform our daily tasks, whether you are a business or a consumer, with this tool. But it's a tool. We use this tool. People use this tool. And, like any tool, it is important to implement regulations and safeguards when using it.
But in the end, it is just a tool that will allow our society, humanity, to reach a better standard of living, but it is just a tool. This is not a living being that will get out of control on its own, not without our management and supervision. Therefore, regulation is important. We won't all be dead by 2030.
This doesn't quite fit with the scenario you just laid out. No, it's a great tool. That's what he is. That's all he is. Well, you know, listen, I knew you would make me...you're a rational person. Do you think some of the comments in Dario's notes—from people working on the front lines—are they too sharp, too emotional?
I don't know the reason, but I know it's important. And it's important, and I agree, Dario, that we need to have safeguards in place ; These are protections not only for the user, but also for companies like Broadcom and any others that choose us to implement in their infrastructure. That we are implementing protective measures.
it. We don't need to slow down to do this. No, I think the way I see it—look, I don't know about the learning, but when you want to conclude with a product, I see it as remaining very, very strong. Let's leave it at that. This is Hock Tan, president and CEO of Broadcom, and the charitable foundation has a stake.
Mad Money returns after a break. Hoku, thank you very much. Thank you, Jim. He was happy to chat. Next: Leading AI labs call for a slowdown in the technology's development, Cramer explores how it might work, with George Kurtz. .
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