Broadcom has reached a historic milestone, surpassing a US$1 trillion market valuation amid the rapid growth of the artificial intelligence (AI) market. CEO Hock Tan expressed confidence in a continued AI investment surge through the late 2020s. He noted that within three years, Broadcom's clients aim to build extensive computing clusters equipped with millions of AI chips, driving significant market growth.
Earnings call recap and highlights
On December 12, Broadcom posted better-than-expected fourth-quarter earnings, despite slightly underperforming in revenue. The results underscore the company's strong position in the generative AI infrastructure market, which continues to fuel robust demand.
Broadcom reported a 220% year-over-year growth in AI-related revenue for its 2024 fiscal year, totaling US$12.2 billion. This surge, driven by its AI XPU and Ethernet product portfolio, underscores AI's pivotal role in shaping Broadcom's business expansion.
Broadcom is collaborating with three major clients to develop AI chips, with plans to deploy 1 million chips in networked clusters by 2027, according to CEO Hock Tan. He estimated the total market opportunity for its XPUs and AI networking components at US$60 billion to US$90 billion by 2027, as reported by CNBC.
While Broadcom has not officially named its chip customers, analysts indicate it is working with Google, Meta, and ByteDance to accelerate AI system training and deployment. The company has reportedly developed custom processors for these purposes, according to the Financial Times (FT).
Broadcom CEO projects AI investment boom through 2029
In an interview with the FT, Tan predicted that the AI spending boom among major tech firms will persist through 2029. He revealed that Broadcom's Silicon Valley clients are intensively planning 3- to 5-year AI infrastructure investments, advancing at full speed until financial or shareholder constraints arise.
xAI's "Colossus" facility in Memphis, launched in September, houses 100,000 Nvidia GPUs, setting a benchmark in AI computing power. By 2027, however, Broadcom's clients are expected to construct clusters featuring up to 1 million AI chips, according to Tan.
Broadcom's AI focus overshadows speculation on Intel assistance
Hock Tan, renowned for his acquisition expertise, dismissed rumors about aiding Intel during its operational struggles, clarifying that he has not been approached. He reiterated that Broadcom's focus remains firmly on the AI semiconductor market.
"An agreement can only be reached if it is practicable," said Tan. "Feasibility means someone is going to come ask me. There's one thing I've learned since Qualcomm: don't make hostile offers."
In 2018, then-US President Donald Trump blocked Broadcom's US$142 billion hostile takeover bid for Qualcomm, marking an unprecedented intervention, as reported by the FT.
Tan's comments highlight Broadcom's conviction that AI opportunities will remain robust in the near term.
Broadcom leads AI chip market with key tech partnerships
Broadcom is expanding its presence in the AI hardware sector through collaborations with tech giants like OpenAI and Apple to develop custom AI server chips. As companies seek alternatives to Nvidia, the US$3 trillion leader in processors for training large language models (LLMs), Broadcom has become a key partner for AI hardware solutions.
Apple is developing its first AI server processor, codenamed "Baltra," in partnership with Broadcom for networking technology. The chip, set to be manufactured using TSMC's N3P process, is expected to enter mass production by 2026, according to reports from Reuters, TechCrunch, and CEO Times.
Similarly, OpenAI is working with Broadcom on AI inference processors and has secured production capacity from TSMC through this partnership, with production slated for 2026, per Bloomberg and the South China Morning Post. OpenAI has also assembled a 20-member chip development team led by a former Google engineer who contributed to Tensor Processing Units (TPUs).
Beyond OpenAI and Apple, Broadcom is reportedly partnering with Google, Meta, and ByteDance to create custom processors tailored for accelerating AI training and deployment. Analysts highlight these collaborations as evidence of Broadcom's pivotal role in the AI ecosystem.
Broadcom and Marvell dominate the custom chip market, which Marvell projects will grow to US$45 billion by 2028. Both companies are expected to maintain their leadership, with Marvell predicting no significant third competitor emerging in the near term.
As tech giants invest heavily in AI to achieve transformative goals, such as building human-level general AI pursued by OpenAI and Anthropic, Tan views the challenges as opportunities, emphasizing the immense potential of the AI hardware market.
Promising outlook for Broadcom as big tech boosts AI spending
Goldman Sachs raised Broadcom's 12-month price target from US$190 to US$240 on December 15, citing growth in its custom chip client base, according to CNBC.
Morgan Stanley projects that Amazon, Google, Meta, and Microsoft will collectively spend around US$300 billion on capital expenditures in 2024, with higher levels expected by 2026. Business Insider reports that much of this investment will focus on fixed assets like data centers and real estate.
During the latest earnings call, Tan expressed optimism about Broadcom's AI growth, emphasizing the demand for custom AI accelerators. "Massive specific hyperscalers have begun their respective journeys to develop their own custom AI accelerators. We see an opportunity over the next three years in AI," he said, as reported by MSN.
