Open-AI, Broadcom Sign 10-Gigawatt Pact for Chips, Networking

Summary

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Bloomberg Intelligence Podcast Episode Summary

Episode Title: OpenAI, Broadcom Sign 10-Gigawatt Pact for Chips, Networking
Date: October 13, 2025
Hosts: Paul Sweeney, Scarlet Fu
Featured Guests: Mandeep Singh (Senior Tech Analyst, Bloomberg Intelligence), Steve Man (Global Autos & Industrials Research Analyst), Geetha Ranganathan (U.S. Media Analyst, Bloomberg Intelligence)

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Episode Overview

This episode of Bloomberg Intelligence focuses on several high-impact business stories:

• Analyses of OpenAI’s landmark 10-gigawatt partnership with Broadcom, exploring what it means for AI infrastructure, chip manufacturing, and industry competition.
• Discussion of recent credit market jitters stemming from the troubles at First Brands, a major aftermarket auto parts supplier, and what it signals for related sectors.
• Updates and strategic takes on possible M&A activity in the media sector, specifically the rumored Paramount and Warner Bros. Discovery tie-up.

Throughout, Bloomberg Intelligence’s analysts provide in-depth context, industry insights, and real-world business implications.

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Segment 1: OpenAI’s $10 Gigawatt Broadcom Deal (01:35–07:57)

Key Points & Insights

• OpenAI Expanding Compute Capacity:
  OpenAI is securing vast compute capacity by striking large deals: 10 gigawatts with Nvidia, 6 GW with AMD, and now another 10 GW with Broadcom.

• Custom Silicon vs. Merchant Silicon:

  • Broadcom’s Edge: Unlike Nvidia and AMD (merchant silicon—generalized chips), Broadcom supplies custom silicon tailored for specific clients like OpenAI and Google.
  • Google’s Precedent:
    Google’s TPUs, built by Broadcom, underpin a majority of Broadcom’s AI revenue.
    This approach offers major cost savings (“A custom silicon that Broadcom is making for Google costs you six grand” – Mandeep Singh, 02:44).
  • Cost Advantage:
    • Nvidia AI chips: ~$30,000 per chip, with gross margins ~75%.
    • Broadcom custom chips for Google: ~$6,000 per chip.
    • “One gigawatt with Nvidia silicon would cost you about 40 to 50 billion. One gigawatt with a Broadcom open air silicon would cost you 25 to 30 billion.” (Mandeep Singh, 04:17)
    • That’s a 30–40% cost differential in favor of custom silicon strategies.

• Deal Structure and Financing:

  • The Broadcom deal, unlike the Nvidia and AMD deals, does not involve investment or stock components—just procurement.
  • OpenAI faces enormous upfront costs (up to $500 billion for 10 GW with Nvidia), and while there is significant investment from partners (e.g., Nvidia’s $100B), OpenAI must close the funding gap by ramping revenues and striking equity deals with major players and sovereign funds.

• Apple's Absence in AI Infrastructure Deals:

  • Apple notably missing from the silicon arms race.
  • “A company like Apple will never go for merchant silicon. Look at what they have done in their own devices. It's all custom silicon.” (Mandeep Singh, 06:20)
  • Apple’s options: likely to pursue its own custom silicon—possibly via Broadcom or Marvell. Catching up will take time, even with Apple’s large cash reserves.

Notable Quotes

• “OpenAI is going after having as much compute capacity as they can...In the case of custom silicon, which is what Broadcom does, a company like OpenAI or Google...it saves you a lot of money.”
  — Mandeep Singh, 02:24
• “One gigawatt with Nvidia silicon would cost you about 40 to 50 billion. One gigawatt with a Broadcom-OpenAI silicon would cost you 25 to 30 billion.”
  — Mandeep Singh, 04:17
• "Apple has a ton of cash. It can't buy its way to a solution here...you need the best end chips. That's why everyone is buying Nvidia."
  — Mandeep Singh, 07:27

Timestamps:

• Intro to Broadcom deal: 01:35
• Custom vs. merchant silicon: 02:24
• AI chip cost comparison: 04:17
• Deal financing: 05:01
• Apple’s strategy: 06:12–07:57

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Segment 2: First Brands & Credit Market Jitters (10:09–14:45)

Key Points & Insights

• Who is First Brands?
  A major supplier of aftermarket auto parts (brake pads, oil filters, windshield wipers), critical for everyday consumers.

• Financial Trouble and Market Reactions:

  • News of financial distress and possible malfeasance at First Brands, with the resignation of founder/CEO Patrick James.
  • The trouble coincides with issues at Tricolor, another auto-adjacent firm, raising sector-wide concerns but analysts see risks as contained.

• Aftermarket Resilience:

  • Analyst Steve Man notes that larger auto parts retailers (O’Reilly, AutoZone, Advance Auto):
    • Not directly financially exposed to First Brands’ issues.
    • Protected by multi-supplier redundancy (many producers exist for common replacement parts).
    • “These auto parts retailers are actually shielded from what’s happening with First Brands.” (Steve Man, 13:00)

• Potential Upside for Retailers:

  • If First Brands stalls, others may step in or raise prices, possibly boosting automotive retailers’ margins.

Notable Quotes

• “Companies like O’Reilly, Autozone…are actually shielded from what’s happening with First Brands.”
  — Steve Man, 13:00
• “If First Brand does stop operations...O'Reilly and Autozone will probably raise prices and actually will help juice up their margins.”
  — Steve Man, 14:11

Timestamps:

• First Brands background: 10:39
• Market reaction & contagion analysis: 11:49, 14:11

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Segment 3: Media M&A—Paramount & Warner Bros. Discovery (17:04–22:51)

Key Points & Insights

• Ongoing Merger Speculation:

  • Rumors are swirling about a possible acquisition of Warner Bros. Discovery by Paramount (backed in part by the Ellison family and possibly private equity).
  • Warner’s CEO David Zaslav reportedly rejected a $20/share offer, aiming for $40/share—a large gap yet to close.

• Deal Complexity:

  • Paramount is the potential acquirer, despite being smaller by enterprise value than Warner Bros. Discovery.
  • Funding source ambiguity: Ellison family or private equity (Apollo, Blackstone, Legendary, etc.).

• Warner Bros. Discovery’s Split Strategy:

  • Warner is separately considering spinning off its TV network business (declining) from its thriving streaming & studios segment (which commands 30% of recent box office).
  • Dilemma: Accept Paramount’s full-company offer (offloading risky TV networks now) or pursue a split and potentially maximize value from the studios/streaming business.

• Cord Cutting’s Ongoing Toll:

  • U.S. pay TV households peaked at 104 million, now at 65 million, possibly falling to 40 million within 3–4 years.
  • EBITDA projections have fallen short due to TV business declines (from expected $14B to current $8.5–9B).

Notable Quotes

• “David Zaslav…rejected that offer as being too low. Now we know…he had been looking for about $40 a share. So obviously, that's a huge, huge gap right there.”
  — Geetha Ranganathan, 17:57
• “They are on this path to separating the two companies…streaming and studio part of the business…is just doing extremely well…making up almost 30% of the box office.”
  — Geetha Ranganathan, 20:01
• "The real problem, Paul...is what the outlook is going to be for the TV networks. And that's where I think it's a little bit of a double edged sword."
  — Geetha Ranganathan, 20:43
• “Pay TV households were somewhere at about 104 million…today, they’re at about 65 million. The idea…is that this is probably going to go to 40 million, maybe in the next 3 to 4 years.”
  — Geetha Ranganathan, 22:03

Timestamps:

• Start of M&A media segment: 17:04
• Warner Bros. offer rejection: 17:57
• Strategic split vs. full sale: 20:01–20:43
• Cord cutting and industry decline: 22:03

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Conclusion

This episode delivers authoritative breakdowns on three trend-defining business stories:

• OpenAI’s aggressive expansion and how custom chip manufacturing (Broadcom) could reshape AI economics and deepen the moat of major players.
• Why First Brands’ implosion is more contained than headlines suggest, and the robust fundamentals of the auto aftermarket.
• The chess game in U.S. media: why the outcome of the Paramount–Warner Bros. Discovery negotiations may define legacies, with cord cutting rapidly rewriting the industry’s economics.

The tone throughout is analytical but accessible, blending Bloomberg Intelligence’s data-driven approach with a knack for real-world context.

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Transcript

[Host/Announcer]

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[Paul Sweeney]

Mandeep Singh joins us here because we want to get some more details on this Broadcom deal because again, moving the stock big time helping propel the NASDAQ to a nice move today. Mandeep Singh is a Senior Tech Analyst for Bloomberg Intelligence. He's been telling us about AI for like a couple of years now. And folks, if you don't really know what AI is and you have access to the Bloomberg terminal, just go type in bi go. That'll get you to Bloomberg Intelligence homepage in the search bar. Just type in AI and it'll bring up send you to the definitive report. Really large report on AI. What is it, how to play it and what's the future of AI? It is the definitive research report on Wall street on AI. It's and Mandeep Singh is to blame for that. Mandeep, talk to us about this Broadcom deal here. Lay it out for us. What does it mean for Broadcom and for just kind of an OpenAI as well?

[Mandeep Singh]

Yeah, I mean look, OpenAI is going after having as much compute capacity as they can and they did first 10 gigawatts with Nvidia, 6 gigawatts with AMD and now 10 gigawatts with Broadcom and the difference here is with Broadcom, they get to use their own chips. Nvidia and AMD are what we call merchant silicon. Exactly. I mean, that's basically generalized chips where you can deploy the workload you want, whether it's from OpenAI or Microsoft or any other vendor. In the case of custom silicon, which is what Broadcom does, a company like OpenAI or Google. Google makes up almost 50% plus of Broadcom's AI revenue. So Google has their chip called TPUs. They use it for everything run on Google's platform, whether it's YouTube, whether it's AI, whether it's Cloud, everything inside Google Run on their TPU. So OpenAI's strategy here is to use an approach which is similar to Google TPU's because it saves you a lot of money. I mean, imagine an Nvidia AI chip costs you 30 grand. A custom silicon that Broadcom is making for Google costs you six grand. That's the cost differential we are talking about. And it's not because Nvidia has to spend 30 grand to make that chip. They have a 75% gross margin on the chip that they're selling to the customer. So Nvidia's cost is also low, but they mark up the price of their silicon. Same thing with amd. In the case of Google, they are going directly to Broadcom to make that chip at a far lower price. And it's for their own use, which is why they don't have to pay the markup to Nvidia or amd. And that's why having your custom silicon strategy is so good, because it really saves you. So one gigawatt with Nvidia silicon would cost you about 40 to 50 billion. One gigawatt with a Broadcom open air silicon would cost you 25 to 30 billion. So we are talking about, you know, 30 to 40% cost differential. And it's huge. I mean, in the context of what these guys are trying to do, you know, scale the infrastructure.

[Host/Announcer]

In addition to that distinction, there's also no investment or stock component to this open Air Broadcom deal, which makes it different from the deals that it struck with Nvidia and AMD. So I guess my question is how would OpenAI finance these, the purchase or the chips in general?

[Mandeep Singh]

And that's a great question because right now they have to do a lot of financing. It's one thing that's a common thread in the Nvidia transaction where even though Nvidia is putting $10 billion in OpenAI, they still have to find the remainder of the money. So if you imagine you know, 40 to $50 billion per gigawatt, 10 gigawatts cost you around 500 billion. Nvidia is already investing up to 100 billion. So they still have to figure out the remainder of 400 billion. In the case of AMD, I mean yes, they are getting some stock, but you still have to figure out the financing for that 300 billion or so. Here it's the same thing. You need the money. And OpenAI's bet is if we keep ramping up our revenue, that is obviously a big source of the funding. We will do a lot of private deals because we already have the buy in from these big players, whether it's Nvidia or Microsoft and other sovereign providers. And I think it's a lot of scale game right now because once we keep hitting our milestones we'll keep raising more money and that's the hope when it comes to OpenAI.

[Paul Sweeney]

One name I haven't heard during all this dance between all these tech companies is Apple. Yeah, what's going on there?

[Host/Announcer]

Glaring absence.

[Mandeep Singh]

Exactly. I think that's the right way to frame it. And look, at some point I think they are going to go the Broadcom route. Out of the three partnerships that OpenAI has had, a company like Apple will never go for merchant silicon. I mean look at what they have done in their own devices. It's all custom silicon. And that's where if I had to pick a strategy for Apple it will likely be custom silicon using Broadcom or Marvell or one of these ASIC providers. But the hard thing for them is because they have missed out all the action in the past three years. It's so hard to catch up. Even if you throw money and you know your capex dollars, time is of the essence and the longer they delay this I feel either is Broadcom or a partnership with Google now that antitrust is behind. So they may very well adopt Google's LM across their huge. That will be huge. But I think, you know, with the regulatory overhang going away that could be a very likely strategy.

[Host/Announcer]

Apple has a ton of cash. It can't buy its way to a solution here.

[Mandeep Singh]

Who do you buy? I mean these are all scale players and Broadcom maybe you could say Marvel is a smaller player but you need the best end chips. That's why everyone is buying Nvidia, because, because they have the highest performance per watt. So you can't really get a second or a third player because then you compromise on the performance per watt when the biggest constraint out there is power. So you know you need the leading player when it comes to the chip side of the equation.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

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[Paul Sweeney]

Let's get back to what's happening in the markets. One of the concerns and Scarlett mentioned a couple of times here today is in the credit markets. Do we have some concerns out there? First brands, for example, their challenges there have really spooked some parts of the credit market. We want to get the latest on what's going on there. We check in with Steve Man Bloomberg Intelligence Global Autos and industrials research analyst. Steve, from your perspective, just tell us for the people out there that don't know who First Brands is, who are they and what happened?

[Steve Man]

Yeah, First Brand is a big huge aftermarket parts supplier. Some of the brands are really well known in the market. Parts include like brake pads, engine oil filters, windshield wipers. So a lot of these are just very fast wearable parts that everyday consumers buy.

[Host/Announcer]

Okay, so it's an, it's something that's quantifiable, it's noble to consumers. And it kind of shocked everyone when it ran into financial problems. And I know that everyone's still trying to uncover how much of this is perhaps corporate malfeasance or there might be some fraud going on. But it happened at the same time that another company named Tricolor was also falling apart. And both of these are tied to the auto sector. They're not making cars and selling cars directly, but you know, they are tied to the business of selling cars or the business of taking care of car consumers afterwards. What does that say about the car industry, Steve?

[Steve Man]

Yeah, I think those two, two instances really freaked out the market based on our research. I think those are really contained situation to those companies and don't feel there's a broader impact. But you never know. The market's based on investor sentiment. But we did some research on the impact on the aftermarket parts market. Companies like O'Reilly, Autozone and Advanced Auto Parts are unlikely to see impact on their supply chain. Like I said earlier, these are high commodity parts. There's a lot of producers that actually produce wipers and brake pads, not just first brands. So it's not going to impact the consumer. It's not going to impact companies like O'Reilly or Autozone. It actually may be beneficial to the aftermarket retailers in terms of higher prices.

[Paul Sweeney]

How important are these aftermarket retailers? I mean, it seems, I keep hearing, reading your research, that people are holding onto their cars longer and longer and longer. And therefore this After Parts, it's a pretty good business.

[Steve Man]

It is a very good business. It's a relatively high margin business, great for cash flow. So in this instance with first brand companies like O'Reilly, Autozone doesn't really, on a financial perspective, doesn't really deal with first brands. They buy parts from first brands, but they pay the financial institutions and this financial institution actually pays first brand through these, what we call supplier agreements, finance agreements. So you know, these auto parts retailers are actually shielded from what's happening with first brands.

[Host/Announcer]

The news of course today is that First Brands is founder and CEO Patrick James, someone that a lot of people don't know and haven't heard of. He is resigning because of course the company is facing an investigation over its finances and he will be replaced by Charles Moore as an interim CEO. This is very inside baseball, Steve, but what I wanted to get to is this idea that a lot of people are not overly concerned that this spells broader problems. At what point might you get a little bit more concerned?

[Steve Man]

I think, I think if it if there's a contagion in fact, which I think is a low, low, low probability. The other issue is in the supply chain. Is it going to if First Brand does stop operations and stop producing parts, does it impact the supply chain of like O'Reilly and Autozone? I think temporary it does, but what really could happen is that O'Reilly and Autozone will probably raise prices and actually will help juice up their margins.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

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[Mandeep Singh]

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[Paul Sweeney]

M&A Media likely to be some type of media activity. M and A activity in the media space as some of these companies need to consolidate even more to get even more scale to compete against the Netflix of the world, not to mention the Amazons and the Apples and so on and so forth. So one of the deals that's out there potentially is Skydance, Paramount maybe doing a deal with Warner Brothers Discovery. Let's see where we are right now. There's been a lot of rumors and a lot of news reporting about a potential hookup between these two companies. Geetha Ranganathan, she looks at this stuff. She's the U.S. media analyst for Bloomberg Intelligence located in our Princeton, New Jersey office. Geetha, I mean, the scuttlebutt is, you know, Paramount is interested in buying Warner Brothers Discovery, but I don't, we haven't seen Warner Brothers really open to a deal, at least not at the prices that have been bandied about. What's the latest?

[Geetha Ranganathan]

Yeah, the latest, Paul, is, I mean, as you just said that there have been rumors now ongoing about this, these possible sale talks for over a month. Over the weekend, you know, Lucas Shaw and Bloomberg News basically broke the story that Warner Brothers did receive an offer for 20 at $20 a share. But David Zaslav, the CEO of Warner, has basically rejected that offer as being too low. Now we know from some prior reporting that he had been looking for something like about $40 a share. So obviously that's a huge, huge gap right there.

[Paul Sweeney]

And I'm just looking at the size of these companies. I mean, Warner Brothers has a Warner Brothers Discovery has an enterprise value of more than twice that of Paramount. How's that math going to work?

[Geetha Ranganathan]

Yeah, so this is what we've been kind of, you know, scratching our heads about. So initially when we had, you know, the news come in, one of the big pieces that was mentioned was that this was going to be majority cash deal and a lot of the funding was going to come from the Ellison family. Now things seem to have changed a little bit. Last week because we heard that private equity players were getting involved. So Apollo was one of the names that was mentioned. It looks like Paramount had approached Blackstone, but maybe they were not really that interested. Legendary was also thrown into the mix. So we're not completely sure just yet whether, you know, Paramount is going to proceed with a higher offer with some of these external sources of financing, or whether really the Ellison family is kind of going, going to step in and basically fund majority of the acquisition.

[Paul Sweeney]

Well, it's not like he can't afford it. I just typed in Rich. Go Rich. That's the list of the top most wealthy people in the world. According to Bloomberg, Mr. Ellison is number two with a net worth of $350 billion. So there's certainly some capital there to be deployed. Keith, what's the sense of timing here? I know Warner Brothers Discovery, they're actually pursuing a kind of a parallel path, which is they're separating their businesses a little bit. Tell us about that.

[Geetha Ranganathan]

Yeah, so I, you know, I really think here the odds are in Warner Brothers Discovery's favor. And I say that because as you just pointed out, they are on this path to separating the two companies. They're separating out the TV networks, which really doesn't have a great growth outlook from their streaming and studio assets, which by the way is just doing extremely well. The studio has had an absolutely fantastic run this year. They're making up almost 30% of the box office. They've had hit after hit after hit. So they really are on a winning streak. And this is what I think gives David Zaslav a lot of confidence that he can get top dollar for at least the streaming and studio part of the business. The real problem, Paul, and you know this very well, is what the outlook is going to be for the TV networks. And that's where I think it's a little bit of a double edged sword. Because the Paramount offer right now is for the entire company, which means he gets to offload, you know, the TV networks, doesn't really have to worry or think about it. The thing is, if he waits and, you know, pursues the split, of course streaming and Studios is going to do really well. But then again, we're stuck with the, you know, the TV networks business without, you know, much of really a future, a proper future, good outlook for it. So, so that's really where the dilemma is for the Warner Brothers Discovery management team.

[Paul Sweeney]

And what's interesting here, I think, particularly if you're a banker or a lawyer trying to put a deal together, is we have A willing seller here, Mr. Zasov, has stated he's willing to sell and stated that it's probably makes sense for this industry to consolidate even more. So it sounds like it's just going to come down to price.

[Geetha Ranganathan]

It is going to come down absolutely to price. I mean, he's already kind of said on multiple occasions that, you know, there are people who are interested, especially in the streaming and studio part of the business. He is going to push hard, very hard for, for, you know, on the, on the price front. We know he's a really tough negotiator, but I'm not really sure how much amount is going to be willing to do it to pay up for this.

[Paul Sweeney]

So broadly speaking, for these networks, do they go to zero with code cutting, cord cutting?

[Geetha Ranganathan]

They won't go to zero, Paul, but they're definitely, I mean, the floor has been going lower and lower. So you very well know that, you know, at its peak, pay TV households were somewhere at about 104 million in the country today, they're at about 65 million. The idea, or at least the thinking on the street, is that this is probably going to go to somewhere like about 40 million, maybe in the next three to four years. But who knows? I mean, the rate of decline has been pretty dramatic. I mean, even when Warner Brothers and Discovery came together a few years ago, remember they had projected $14 billion in EBITDA. That number, we never got anywhere close to that number. This year we're looking at something like about eight and a half billion or nine billion in ebitda. So there's, it's just such a big gap and that's just because of the dramatic decline in the TV network business.

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