Broadcom, Apple’s chip supplier, on Friday forecast a boom in demand for its artificial intelligence (AI) chips, reaching a market capitalization of $1 trillion for the first time.
The chip supply company, which also serves other tech giants, expects sales of its AI products to rise 65% in the first quarter, far outpacing the 10% growth rate for semiconductors overall. Exceeds.
The addressable market for AI components the company designs for data center operators is expected to reach $90 billion by 2027, Bloomberg reports.
Broadcom shares rose 24% to $224.80 in New York on Friday, the biggest single-day gain since August 2009, when the company’s predecessor, Avago Technologies, went public. The business merged with Broadcom Corp. in 2016 to form its current permanent company.
Like Nvidia Corp., Broadcom has been a big beneficiary of the AI spending frenzy, with Chief Executive Officer Hock Tan saying the company is a new major customer for the data center giant’s hyperscalers. He said he had acquired two companies.
The Bloomberg report further stated that investors are rushing into Broadcom stock this year, lured by AI optimism.
California-based Palo Alto had predicted it would generate more than $10 billion in annual revenue from the market, more than any other part of its business. And last year, that figure ended up reaching $12.2 billion.
Tan said AI revenue grew 220% over the year, driven by demand for processors and networking components. Meanwhile, demand for non-AI chips will decline in the first quarter.
Broadcom’s total revenue for the period through January is expected to be $14.6 billion, in line with expectations.
The company announced fourth-quarter earnings, excluding certain items, of $1.42 per share. Revenue for the period ended Nov. 3 soared to nearly $14.1 billion.
Analysts expected earnings of $1.39 per share and average sales of $14.1 billion, according to data compiled by Bloomberg.
Data center providers rely on Broadcom’s custom chip designs and network semiconductors to build AI systems. We also sell auto parts, smartphones, and internet connection devices. Meanwhile, its foray into software includes products for mainframe computers, cybersecurity, and data center optimization.
Broadcom Semiconductor’s sales rose 12% to $8.23 billion in the fourth quarter. Meanwhile, software revenue increased nearly 200% to $5.82 billion. Broadcom is much larger than it was in 2023, thanks in part to its acquisition of VMware Inc., which it bought for about $69 billion.
Apple Inc. is Broadcom’s largest customer, and the company provides iPhone components to Broadcom.
Bloomberg previously reported that Apple would begin switching away from its primary Broadcom wireless chips next year. The company is replacing Broadcom components with its own versions, a trend that is likely to affect chipmaker Qualcomm as well.
But Tan said Broadcom remains highly relevant to Apple in its multi-year roadmap for various technologies, adding that the company remains open to acquisitions.
“This has been core to the company’s strategy and business model for the past 10 years,” he said.
(With information from Bloomberg)
