Broadcom on Thursday expected quarterly revenue to beat Wall Street expectations and predicted demand for its custom artificial intelligence chips will soar in the coming years.
The Palo Alto, Calif.-based company’s stock price is expected to rise in 2027, when Chief Executive Officer Hock Tan told investors on a conference call that the revenue opportunity from AI could be in the range of $60 billion to $90 billion. Shares rose 14% in late trading after the company said it expected that.
Tan suggested that the three “hyperscale” customers are likely to deploy multi-million AI chip clusters at that time.
Big tech companies are backing Broadcom to make advanced custom artificial intelligence chips for so-called hyperscalers, racing to reduce dependence on front-runner Nvidia’s expensive and supply-constrained AI processors. There is.
As companies double down on investments in GenAI infrastructure, demand is also increasing for Broadcom’s networking chips, which help move vast amounts of data used in applications such as OpenAI’s ChatGPT.
“Broadcom’s strong performance is no surprise. The company is one of several companies benefiting from AI powering the global semiconductor industry, with AI revenue up 220% this year. eMarketer analyst Jacob Bourne said.
The company expected first-quarter revenue of about $14.6 billion, compared to the average analyst estimate of $14.57 billion, according to data compiled by LSEG.
But analysts have questioned the potential for future business from Apple, one of Broadcom’s most important wireless customers, as it moves further with its chip designs.
Apple’s plans include switching to its own chips for Bluetooth and Wi-Fi connectivity starting next year, replacing some of the components currently provided by Broadcom, Bloomberg News reported early Thursday. .
Although the company faces stiff competition from Nvidia’s Ethernet-like Infiniband products, Broadcom is one of the largest providers of advanced networking equipment and could still benefit from AI data center expansion. Masu.
“Broadcom, along with companies like Marvell, will continue to be important players in the custom AI ASIC market as Tier 1 hyperscalers continue to introduce their own chips,” said Kingai Chan, senior analyst at Summit Insights. said.
An application-specific integrated circuit (ASIC) is a chip designed for a specific task or application.
While Broadcom is hailed as a chipmaker, it has grown into a tech conglomerate through acquisitions such as the $69 billion purchase of cloud computing company VMware. In the fourth quarter, Infrastructure Software’s revenue increased 196% year-over-year to $5.82 billion.
The company reported fourth-quarter sales of $14.05 billion, an increase of more than 50% year over year. Analysts had expected $14.09 billion.
On an adjusted basis, Broadcom earned $1.42 per share, compared to expectations of $1.38.
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