Segment 2: Broadcom x OpenAI and the AI capacity race
JIM CRAMER: We are here with Hock Tan, CEO of Broadcom. Stock is up nearly 10 percent on a big OpenAI partnership. Hock, you are not a cheerleader. What is the hard business case?
HOCK TAN: Customers building large language models need compute capacity, at scale. We invest to enable a small set of those builders, and we do it with purchase orders, not hopes.
JIM CRAMER: Power is the scare word. People are throwing around 18 Hoover Dams. Where does the juice come from?
HOCK TAN: The power exists. The challenge is making it usable. Do not chase one giant gigawatt site. Distribute 50 to 100 to 200 megawatt sites across the grid. Oracle, Google, Meta, Microsoft are securing capacity. With time, those locations become usable power.
JIM CRAMER: Custom silicon at scale without wrecking margins. How many partners can actually do this with you?
HOCK TAN: Very few. We learned a lot over eight years with Google on AI accelerators. Today we focus on about seven players pushing foundation models. Four are already real customers, meaning production purchase orders at scale.
JIM CRAMER: OpenAI is private, but you would not sign up unless the economics worked.
HOCK TAN: Correct. They are real, fast growing, and we look three to five years out. Generative AI is not a fad. It is how intelligence gets created in software.
JIM CRAMER: Competition. I am not starting a cage match with Jensen. Is there room for everyone?
HOCK TAN: Jensen is a friend. Demand for compute is more than doubling year over year. No single vendor can satisfy it. The race is performance per watt and performance per dollar, plus networking and software stack to run the models at scale.
JIM CRAMER: Everyone talks AI, but VMware and the rest of Broadcom matter. How are they doing?
HOCK TAN: VMware is growing and throwing off large free cash flow. One of our best assets.
JIM CRAMER: You have called this a secular wave. How big can it be?
HOCK TAN: Think railroads and the internet. Global GDP is roughly 110 trillion. About 30 percent is tech and knowledge driven. Generative AI can push that toward 40 percent. That is on the order of 10 trillion in added value annually over time. Spend a trillion a year and the returns can still be compelling.
JIM CRAMER: Translation for investors. You are meeting demand that already exists.
HOCK TAN: Yes. Our job is to deliver capacity and keep optimizing.
JIM CRAMER: Hock Tan, Broadcom CEO. Big day. Thanks for being here.
HOCK TAN: Thank you, Jim.