Broadcom announced a quarterly revenue forecast that exceeded Wall Street expectations on Thursday, and it anticipates a surge in demand for its custom AI chips in the coming years.
The company, headquartered in Palo Alto, California, saw its stock price rise 14% in after-hours trading, after CEO Hock Tan told investors in a conference call that he expects AI-related revenue opportunities to be between $60 billion and $90 billion by fiscal year 2027.
Tan indicated that there could be three "hyperscale" customers deploying millions of AI chip clusters by then.
Large tech companies have been working to reduce their reliance on the expensive and supply-constrained AI processors manufactured by leader Nvidia (NVDA.O), which benefits Broadcom, a company that produces advanced custom AI chips for so-called hyperscale enterprises.
As companies double down on investments in GenAI infrastructure, the demand for Broadcom's network chips (which support the massive data needs of applications like OpenAI's ChatGPT) is also increasing.
eMarketer analyst Jacob Bourne stated, "Broadcom's strong performance is not surprising. It is one of the few companies benefiting from the semiconductor industry's recovery due to AI, with its AI revenue growing 220% this year."
The company expects first-quarter revenue to be around $14.6 billion, while data compiled by LSEG shows that analysts' average expectation is $14.57 billion.
Are Apple's "self-developed" chips a concern?
However, analysts have raised questions about the potential scale of Apple's future business, as Apple is one of Broadcom's most important wireless customers and is working to design more of its own chips.
Bloomberg News reported earlier on Thursday that Apple's plans include switching to self-developed Bluetooth and Wi-Fi connectivity chips starting next year, replacing some components currently supplied by Broadcom.
Despite facing intense competition from Nvidia's Ethernet-based InfiniBand products, Broadcom continues to benefit from the expansion of AI data centers, as it is one of the largest suppliers of advanced networking equipment.
Summit Insights senior analyst Kinngai Chan stated, "Broadcom will continue to be a significant player in the custom AI ASIC market alongside companies like Marvell, as top-tier hyperscale enterprises continue to roll out their in-house chips."
Application-specific integrated circuits (ASICs) are chips designed for specific tasks or applications.
While known as a chip manufacturer, Broadcom has evolved into a technology group after acquiring cloud computing company VMware for $69 billion. The infrastructure software division grew 196% year-over-year to $5.82 billion in the fourth quarter.
The company reported fourth-quarter revenue of $14.05 billion, an increase of over 50% compared to the same period last year. Analysts had previously expected $14.09 billion.
