Broadcom on Thursday forecast quarterly revenue above Wall Street estimates and forecast growing demand for its custom artificial intelligence chips over the next few years.
Shares of the Palo Alto, Calif.-based company rose 14% in aftermarket trade after CEO Hock Tan told investors in a conference call that he expects a revenue opportunity from AI in the range of $60 billion to $90 billion in fiscal 2027.
Tan indicated that the three “hyperscale” customers are likely to use millions of AI chip clusters at that time.
Big tech is looking to reduce its reliance on expensive, supply-constrained AI processors made by front-runner Nvidia, which helps Broadcom, which makes advanced custom artificial intelligence chips for so-called hyperscalers.
Demand for Broadcom’s networking chips, which help move large amounts of data used by applications such as OpenAI’s ChatGPT, has also increased, as businesses double down on investments in GenAI infrastructure.
“Broadcom’s strong performance doesn’t come as a surprise. It’s one of many companies benefiting as AI invigorates the global semiconductor industry, with its AI revenue up 220% this year,” said eMarketer analyst Jacob Bourne.
The company forecast revenue of about $14.6 billion for the first quarter, compared with analysts’ average estimate of $14.57 billion, according to data compiled by LSEG.
Analysts, however, have raised doubts about the potential future business volume from Apple, one of Broadcom’s most important wireless customers, as the iPhone maker works to design more of its chips in-house.
Apple’s plans include switching to a homegrown chip for Bluetooth and Wi-Fi connections starting next year, replacing some parts currently provided by Broadcom, Bloomberg News reported earlier Thursday.
Although the company faces intense competition from Nvidia’s Ethernet-like InfiniBand products, Broadcom still benefits from the expansion of AI data centers as it is one of the largest providers of advanced networking equipment.
“Broadcom will continue to be a relevant player in the custom AI ASIC market as companies like Marvell continue to introduce their in-house chips for tier-1 hyperscalers,” said Qinghai Chan, senior analyst at Summit Insights.
Application-specific integrated circuits, or ASICs, are chips designed for specific functions or applications.
While admired as a chipmaker, Broadcom has expanded into the tech conglomerate thanks to acquisitions such as its $69 billion acquisition of cloud-computing firm VMware. The infrastructure software segment grew 196% to $5.82 billion in the fourth quarter from a year ago.
The company reported fourth-quarter revenue of $14.05 billion, up more than 50% from a year earlier. Analysts had expected $14.09 billion.
On an adjusted basis, Broadcom earned $1.42 per share, compared to estimates of $1.38 per share.
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