The AI trade has been moving from one hardware bottleneck to the next, with many speculating where the next bottleneck could lie so they can lock in astronomical gains. What many fail to realize is that these bottlenecks raise a serious question for companies, namely, where to deploy their cash to gain a supply advantage over competitors. This makes the balance sheet itself a huge bottleneck, and Broadcom (AVGO) just found it out the hard way.
In October, I covered the AVGO stock at a time when OpenAI was signing deals left and right. The agreement with Broadcom was for 10 gigawatts of custom AI accelerators, designed by OpenAI and deployed by Broadcom. As of today, the question is who will finance the first phase of the deal for 1.3 gigawatts of data center capacity. Just last month, OpenAI reported it failed to achieve its new users and revenue targets. Now, it can’t finance the $18 billion needed to kickstart “Project Nexus”—the codename for its deal with Broadcom.
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This development comes even though, on their respective earnings calls, hyperscalers increased their 2026 capex expectations. Microsoft (MSFT) is set to spend $190 billion in 2026, with Alphabet (GOOG) (GOOGL) planning a similar amount. Yet Satya Nadella’s firm might be unwilling to back OpenAI here. OpenAI’s negative cash flows and failure to achieve revenue targets are making investors jittery, and it has just started showing. This also brings back the debate about the AI bubble, but for Broadcom shareholders, the question now is who will come and fill the financing gap so the company can contribute to the AI infrastructure buildup, with or without OpenAI.
About Broadcom Stock
Broadcom is a technology company that specializes in semiconductor devices and infrastructure software solutions. The company operates through the Infrastructure Software and Semiconductor Solutions segments. Its offerings include networking connectivity, wireless device connectivity, servers, storage system solutions, broadband solutions, and others.
Broadcom’s stock more than doubled over the last year, significantly outperforming the S&P 500 ($SPX), which returned around 30% during the same period. It has also continued to outperform the S&P 500 so far this year, gaining around 19% compared to the broader market’s returns of approximately 7%.
