Broadcom stock (AVGO) soared more than 20% Friday as the chipmaker touted a “huge” opportunity in the artificial intelligence market during its quarterly earnings call the night before.
Broadcom CEO Hock Tan said his company’s custom AI chips will generate $60 billion to $90 billion over the next three years from the hyperscaler’s three existing customers, which the company did not name. The company said it expects it to generate revenue of approximately 20%. Tan reiterated his belief that each of the three hyperscalers will deploy 1 million clusters of custom AI chips, called XPUs, by 2025.
Broadcom also confirmed it has added two more hyperscaler customers “developing their own next-generation AI XPUs” with the potential to generate additional revenue. Media reports citing anonymous sources suggest those new customers could be ChatGPT maker OpenAI and Apple (AAPL).
“We believe the opportunity for our company over the next three years in the AI space is huge,” Tan said on a conference call with investors Thursday night.
Broadcom’s gains on Friday pushed the company’s stock price up about 98% for the year, pushing the stock to an all-time high of $221 and pushing its market capitalization above $1 trillion.
According to The Information, Apple is reportedly working with Broadcom to develop AI server chips. The tech giant’s move to make its own server chips is aimed at cutting costs and reducing its reliance on Nvidia’s (NVDA) GPUs (graphics processing units). OpenAI is reportedly partnering with Broadcom to make a similar move, according to Reuters and Bloomberg.
Broadcom makes custom chips for data centers, consumer electronics such as smartphones and laptops, and electric vehicles. The company expanded into enterprise software production through partnerships with Microsoft (MSFT) and Google (GOOG).
Still, there are concerns that unless Big Tech can meaningfully monetize new technologies, it will be unable to sustain spending on AI infrastructure. According to a recent Gallup poll cited by Bloomberg, OpenAI lost about $5 billion in 2024. And only 4% of U.S. workers actually use AI every day.
Broadcom’s opportunities in AI chips aren’t reflected in other parts of its semiconductor business. Overall, semiconductor revenue increased 12% year-over-year to $8.2 billion in the fourth quarter. But this masked the differences between the company’s AI and non-AI chips. AI chip sales increased significantly by 150% to $3.7 billion, while non-AI semiconductor sales decreased 23% to $4.5 billion.
“The future reality for this company is that the AI semiconductor business will quickly outstrip the non-AI semiconductor business,” Tan said.
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