Broadcom Value Jumps Over $1tn On AI Optimism

Matthew Broersma,
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Broadcom stock price surges 24 percent after company predicts ‘massive’ opportunity from custom AI chips for large customers

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Shares in Broadcom jumped 24 percent on Friday, putting the company’s market capitalisation over $1 trillion (£800m), after its chief executive spoke of a “massive” opportunity in artificial intelligence (AI).

Following the stock growth on Friday, Broadcom was up 98 percent this year.

Chief executive Hock Tan said Broadcom expects AI accelerator chips to generate $60bn to $90bn in revenue over the next three years from its three existing hyperscaler customers.

Tan projected on an earnings call the previous evening that each of the unnamed companies would deploy 1 million clusters of Broadcom’s custom AI chips, called XPUs, by 2025.

A computer screen displays lines of code. Image credit: Unsplash
Image credit: Unsplash

Custom chips

The company also confirmed it has added two more hyperscaler customers who are “in advanced development for their own next-generation AI XPUs” which could generate further revenue.

Reports have indicated the two companies may be Apple and ChatGPT developer OpenAI.

“We see our opportunity over the next three years in AI as massive,” Tan said on the call.

On the call Broadcom also forecast first-quarter revenue above analysts’ estimates.

The company makes custom data centre chips for firms that are looking to create their own silicon for AI applications and diversify away from Nvidia, which dominates the market for such chips and the software used to link them to AI training and inference applications.

Apple may be working with Broadcom on an AI server chip, The Information reported, while Reuters and Bloomberg reported that OpenAI was working on a similar chip with Broadcom.

AI infrastructure

Companies linked to AI have seen their stock prices rise dramatically this year as investors have sought to buy into the growth of a new opportunity.

Analysts at Great Hill Capital said companies such as Broadcom could benefit as the AI industry matures and moves from training models to inference, a less processor-intensive task that involves providing services to users.

Nvidia’s shares are up nearly 180 percent this year after falling 2 percent on Friday. The company’s market capitalisation is over $3tn.

Concerns remain over the huge costs associated with building out AI infrastructure, with OpenAI making $5bn in losses this year.

Meanwhile only 4 percent of US workers actually use AI daily, according to a recent Gallup poll cited by Bloomberg.