Broadcom Inc., a chip supplier for Apple Inc. hit a $1 trillion market valuation for the first time on Friday, after predicting a boom in demand for its artificial intelligence (AI) chips.
The chip supplies, which serves other tech giants as well, had predicted that the sales of its AI products will gain 65 per cent in the first fiscal quarter, way faster than its overall semiconductor growth of 10 per cent.
By fiscal 2027, the chipmaker predicted, the addressable market for AI components it designs for data center operators would go as high as $90 billion, Bloomberg reported.
Broadcom‘s stock rose 24 per cent to $224.80 in New York on Friday, its biggest one-day share-price rally since August 2009, when the precursor company Avago Technologies Ltd held its initial public offering. This business in 2016 merged with Broadcom Corp. to form the current standing company.
Broadcom, similar to Nvidia Corp., is making itself a major beneficiary of the AI spending frenzy, with the company’s Chief Executive Officer Hock Tan saying that the firm won two major new hyperscaler customers, the biggest operators of data centers.
The Bloomberg report further said that investors have piled into Broadcom’s stock this year, lured by AI optimism.
The California-based Palo Alto had predicted that it would generate more than $10 billion in annual revenue from that market, surpassing its business’ other parts. And in the last fiscal year, this figure ultimately reached $12.2 billion.
Fueled by the demand for processors and networking components, AI revenue grew 220 per cent during the year, Tan said. Meanwhile, demand for non-AI chips will be down in the first quarter.
Broadcom Inc’s total sales in the period, running through January, will be $14.6 billion, in line with the estimates.
The company said that, excluding some items, its profit was $1.42 a share in the fourth quarter. Revenue surged to nearly $14.1 billion in the period, which ended November 3.
As per data compiled by Bloomberg, analysts estimated $1.39 a share in earning and revenue of $14.1 billion on average.
Data center providers depend on Broadcom’s custom-chip design and networking semiconductors to build their AI systems. The company also conducts sales of components for cars, smartphones, and internet access gear. Meanwhile, its push into software sector includes products for mainframe computers, cyber security and data center optimisation.
In the fourth quarter, Broadcom’s semiconductor division had a revenue of $8.23 billion, up 12 per cent. Software sales, on the other hand, grew nearly 200 per cent to $5.82 billion. Broadcom is much larger in comparison to what it was in 2023, and that is partly due to its acquisition of VMware Inc., which it bought for around $69 billion.
Apple Inc., is Broadcom’s top customer, with iPhone components bring provided to the former by the company.
Earlier, Bloomberg had reported that Apple would begin to switch away from a key Broadcom wireless chip starting next year. The company has replacing Broadcom’s components with that of its in-house versions, a trend that is also set to hit chipmaker Qualcomm Inc.
Tan, however, said that Broadcom continued to be highly associated with Apple on multi-year road maps for various technologies, adding that the company remained open to acquisitions.
“That has been a core part of our strategy and business model of this company for the last 10 years,” he said.
(with inputs from Bloomberg)
