Broadcom CEO says generative AI will become a much larger part of global GDP

Broadcom CEO Hock Tan told CNBC’s Jim Cramer on Monday that artificial intelligence could become a larger part of global GDP as the technology spreads across industries.

Tan said the current global GDP sits around $110 trillion, with 30% of that figure “valued from industries related to knowledge-based, technology-intensive.”

“And you put in generative AI, you create intelligence in a lot of other aspects of society,” Tan continued. “That 30% say will grow to 40% of all GDP. That’s $10 trillion a year.”

If AI grows and becomes responsible for a larger piece of global GDP as Tan predicts, it would be a boon to the nascent tech sector and all the industries it relies on. Broadcom makes chips and networking equipment and has been a huge beneficiary of the AI boom as hyperscalers buy up its products. The stock is currently up 53.86%.

Broadcom and OpenAI announced their official partnership on Monday, saying they would jointly build and deploy 10 gigawatts of custom artificial intelligence accelerators. The move is part of a broader effort to scale AI across the industry. Broadcom shares surged in response to the news, up 9.88% by market close.

Broadcom and OpenAI’s deal is the latest in a slew of pricey partnerships among key Big Tech players related to AI.

Tan said OpenAI is “one of those few players in the forefront of creating foundation models,” and noted that even as a private company, the ChatGPT maker is worth about $500 billion. According to Tan, Broadcom’s “hard-nosed” approach to business doesn’t keep the company from looking several years in the future “at this phenomenon, this wave called generative AI.”

Broadcom is tight-lipped about its customers, but said earlier this year it was developing new AI chips with three large cloud customers. Management announced last month it had secured $10 billion in chip orders from a fourth unnamed client.

Tan told Cramer that Broadcom is working closely with “about seven players,” four of which he defined as “real customers,” or ones “who have given us production purchase orders at scale.”

“We feel very good about it,” Tan said of Broadcom’s partnerships. “Because each of these guys need a lot of compute capacity for them to basically play in this game and eventually win this game of creating the best foundation model in the world.”

Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

Disclaimer The CNBC Investing Club Charitable Trust owns shares of Broadcom.