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By Max A. Cherney SAN FRANCISCO (Reuters) -Broadcom is launching a new networking chip on Tuesday that will help companies build artificial intelligence computing systems by stringing together hundreds of thousands of chips that crunch data, deepening its rivalry with Nvidia. The chip, called the Thor Ultra, enables computing infrastructure operators to deploy far more chips than they otherwise could, allowing them to build and run the large models used to power AI apps such as ChatGPT. The Thor Ultra will battle Nvidia's networking interface chips and aim to further entrench Broadcom's control of network communications inside data centers designed for AI applications. It comes after Broadcom on Monday unveiled a deal to roll out 10 gigawatts worth of custom chips for ChatGPT maker OpenAI beginning in the second half of 2026, challenging Nvidia's grip on the AI accelerator market. AI represents a big opportunity for Broadcom. Chief executive Hock Tan said late last year the market the company is going after for its various AI chips is in the range of $60 billion to $90 billion in 2027, divided between its networking chips and the data center processors it helps Alphabet's Google and OpenAI make. Broadcom reported AI revenue of $12.2 billion in fiscal 2024. In September, it announced a new, unnamed $10 billion customer for its custom data center AI chips. The Thor Ultra chip, part of Broadcom's growing catalog of networking chips, operates as a critical link between an AI system and the rest of the data center. The networking chips help data center operators move information around inside a facility. "In the distributed computing system, network plays an extremely important role in building these large clusters," Ram Velaga, a Broadcom senior vice president, told Reuters. "So I'm not surprised that anybody who's in the GPU business wants to make sure that they are participating in the networking." FOCUSING ON CHIP DESIGN While networking chips are crucial to the company's plans, the AI chips Broadcom helps design for large cloud computing companies such as Google are lucrative. Broadcom has worked on multiple generations of Google's Tensor processor, which Google began designing more than a decade ago. The Tensor chips have generated billions of dollars in revenue for Broadcom, according to analyst estimates. During a tour in September of Broadcom's San Jose network chip-testing labs where engineers work on current and forthcoming designs of its networking chips, company executives detailed measures taken to construct and test new networking processors. Towards that end, Broadcom's engineers doubled the bandwidth on Thor Ultra compared with the prior version. They put the chips through rigorous testing and evaluation from the earliest stages of production. To make a chip like the Thor Ultra or flagship series of Tomahawk networking switches, the engineers build an entire system around the chip. With the hardware system team, the engineers will discuss what kind of package the chip uses, how much power it will need and how much heat it will emit, Velaga said. Broadcom does not sell servers itself but offers the designs for components and systems it creates for testing to its customers in order to give them a reference point to construct the networking infrastructure around it. "For every dollar we invest in our silicon, there is at least $6 to $10 that our ecosystem partners are investing," Velaga said. "So a lot of our focus is on design, as if we are almost ready to take it to production." (Reporting by Max A. Cherney in San Francisco; Editing by Muralikumar Anantharaman)

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By Anirban Sen, Saeed Azhar and Matt Tracy NEW YORK (Reuters) -The bankruptcies of automotive-related companies First Brands and Tricolor, along with potential losses at banks and investment funds, are raising new concerns about hidden risks in parts of the credit market — prompting investors to take a closer look at risky debt. Auto parts supplier First Brands and subprime lender and dealership Tricolor both filed for bankruptcy protection last month. The two collapses have rattled some stakeholders in Wall Street's multitrillion-dollar credit machinery, from leveraged loans and collateralized loan obligations (CLOs) to trade‑finance funds and subprime auto loans, raising questions about exposure levels of a number of Wall Street fund managers, which pool capital from investors to provide loans to companies.  "This would serve as a strong precedent for LPs (investors) to question risky offerings," said Zain Bukhari, associate director of risk and valuations at S&P Global. LPs, referring to limited partners, are passive investors that provide capital to a fund.  Some investors may ask for audited statements or quality of earnings from independent audit firms before investing in unsecured assets, Bukhari added. First Brands had roughly $800 million in unsecured supply chain financing liabilities. A sign of such scrutiny appeared in July when First Brands was trying to raise a $6 billion loan to refinance its debt. In August, however, it became clear that potential lenders would require further diligence, including a quality-of-earnings report, according to a document filed by the auto parts company's chief restructuring officer in bankruptcy court. Investors and analysts are now assessing the fallout for the individual firms exposed as well as for the broader market. They hope to gain some clarity during the third-quarter earnings season, which kicks off this week.    "The third quarter earnings become a very interesting litmus test for how this shakes out – people will be very closely following the bank reporting," said Andrew Sheets, global head of corporate credit research at Morgan Stanley. "There will be big questions about where auto loan trends are, (and) other consumer credit charge-off trends are."   First Brands filed for bankruptcy protection on September 29, listing more than $10 billion in liabilities. Some of the finance industry's most prominent names, including Jefferies and UBS Group, have since disclosed exposure of more than $1 billion tied to the collapse of the Ohio-based company. Earlier in October, Jefferies said a fund in its asset management division, Leucadia Asset Management, has about $715 million of receivables tied to First Brands. UBS is assessing more than $500 million of exposure across certain funds. Some investors have asked Jefferies-linked Point Bonita Capital's fund to return money invested in the fund, a source familiar with the matter told Reuters.  On Sunday, Jefferies said its exposure to First Brands Group is limited and that any potential losses would be "readily absorbable." When Jefferies was asked if it will face pressure from investors for more scrutiny on risky investments, a spokesman for the firm declined to comment on Monday. Other banks exposed include SouthState Bank and CIT Group, which is now owned by First Citizens. A broad range of funds including Sound Point Capital Management, Benefit Street Partners and Palmer Square Capital Management hold CLOs, which collectively hold hundreds of millions of the $4 billion of first-lien term loans of First Brands, according to court documents. Investment firms with over $100 million CLO exposure each include AGL Credit and PGIM, according to the recent court filings. The funds and banks either declined to comment or did not respond to requests for comment. A UBS spokesperson said the bank was "working to determine the potential performance impact on the small number of our affected funds."  Meanwhile, Tricolor listed over $1 billion in liabilities, with more than 25,000 creditors, according to its bankruptcy petition. Lenders such as JPMorgan have nearly $200 million of exposure to Tricolor, Reuters has previously reported.  CREDIT RALLY SPUTTERS The credit rally, which got off to a robust start earlier in October, has hit a speed bump in recent days as investors reduced exposure to certain sectors over concerns around weakness in consumer and auto lending, experts said.   "We now seem to have a catalyst important enough to engender a shade of fear," said Neha Khoda, head of U.S. credit strategy at Bank of America, in a note dated October 10. "Credit investors are questioning if they need to be all-in at super-tight spreads, and they won't get a pushback from us."  To be sure, the collapse of First Brands is unlikely to cause a widespread global meltdown across credit markets, some experts said.  "On a deal-by-deal basis, we don't see conditions in the leveraged finance markets as materially different from historical norms," said Logan Nicholson, senior managing director at asset manager Blue Owl Capital.   In the U.S., the overall exposure of CLOs to First Brands currently stands at 0.21%, according to estimates from Morgan Stanley in a note dated September 26. For the CLO funds currently holding First Brands loans, the exposure levels range between 0.001% and 1.8%.  Some experts said that a divergence has emerged in the CLO industry between holders of senior and junior loans, as a cohort of companies with weaker credit ratings have been buffeted by slower macroeconomic growth and headwinds from the Trump administration's tariff policy.  "Probably the larger impact on markets has been on the loan side," said Morgan Stanley's Sheets, adding that the ripple effect from the bankruptcies could impact junior parts of a CLO's capital structure. (Reporting by Anirban Sen and Saaed Azhar in New York; Additional reporting by Matt Tracy and Davide Barbuscia; Editing by Megan Davies and Matthew Lewis)

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WASHINGTON (Reuters) -U.S. small-business sentiment declined in September amid expectations of unfavorable operating conditions in the next six months, and many owners reported raising prices or planning to, suggesting that inflation was poised to increase further. The National Federation of Independent Business said on Tuesday its Small Business Optimism Index dropped 2.0 points to 98.8 last month. It was the first decline in three months. A lapse in government funding amid a political standoff between Republicans and Democrats in Washington has halted the collection and publishing of official economic data, leaving investors and policymakers relying on private surveys to assess the economy's health.  The shutdown, which enters its third week on Wednesday, has delayed the release of the closely watched employment report for September. But September's consumer price data will be published next Friday to assist the Social Security Administration with its annual cost-of-living adjustment for 2026 for millions of retirees and other benefits recipients. The NFIB said the survey's Uncertainty Index jumped 7 points from August to 100, the fourth-highest reading in over 51 years. "Uncertainty is very high, the (Trump) administration has a lot of policy changes still in the air, lots of moving parts," said NFIB Chief Economist Bill Dunkelberg. "Growth in the economy is solid though driven perhaps more by AI-related investments than by spending that impacts Main Street firms." TARIFFS ARE RAISING COSTS FOR BUSINESSES The share of owners expecting better business conditions over the next six months plunged 11 points to 23%.  Commentary from survey respondents included complaints about higher beef prices, health insurance and taxes as well as potential clients "choosing to delay or forgo repairs or improvements due to lack of confidence in the overall economy."  Fourteen percent of owners said inflation was their single most important problem in operating their business because of higher input costs, up three points from August.  The share raising average selling prices increased three points to 24%, with the NFIB noting that "price increases remain above the monthly average of a net 13%." There was also a rise in the proportion complaining about supply chain disruptions affecting their businesses. The price increases and supply chain disruptions are likely because of President Donald Trump's sweeping tariffs on imports. Trump last Friday threatened 100% duties on Chinese imports.  About 31% of owners planned to raise prices in the next three months, up five points from August. More businesses reported declining sales. The share expecting higher inflation-adjusted sales dropped four points. As a result, unsold merchandise is piling up, a worrying sign for the economy. "Solid consumption spending appears to be from the top third of the income distribution and the stock market keeps setting new record highs, producing capital gains income for shareholders," said Dunkelberg. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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