Broadcom rises as US$100 billion AI forecast signals gains in Nvidia-dominated market

Broadcom Limited's logo is pictured on an office building in Rancho Bernardo, California, May 12, 2016

Broadcom shares rose nearly three per cent on Thursday after the company predicted over US$100 billion in AI chip sales next year, signaling rapid share gains in the market dominated by Nvidia.

Big Tech’s push to secure the vast computing power needed for artificial intelligence has lifted Broadcom in the data-center infrastructure race as it helps design custom processors that can serve as an alternative to Nvidia’s costly chips.

Alphabet, Microsoft, Amazon and Meta are expected to spend more than $600 billion to build AI infrastructure this year, boosting demand for chips, servers, storage and networking equipment.

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Broadcom, which supplies semiconductors and infrastructure software, has visibility for about 10 gigawatts worth of AI demand in 2027 from its clients such as Anthropic and Meta Platforms, Melius Research analysts said.

This demand equates to the power consumption needs of more than 8 million U.S. households.

The volumes put Broadcom closer to the scale of recent AI chip deals by Nvidia and AMD, as the rise of custom processors, known as ASICs, increasingly threatens Nvidia’s stronghold in the advanced data-center infrastructure market.

Dispelling AI fears

Both Broadcom and its rival, Nvidia, have seen their stocks decline so far this year amid investor concerns around whether heavy spending on AI will generate sufficient returns to justify lofty tech valuations.

“While investors continue to discuss the sustainability of AI capex growth, our industry research suggests the opportunity for Broadcom is broadening rather than peaking,” Summit Insights analysts said in a note on Wednesday.

Thursday’s jump could add over $42 billion to Broadcom’s market value if gains hold.

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CEO Hock Tan also assured investors the company was well-placed amid widespread supply shortages of memory chips and limited capacity at AI processor manufacturer TSMC.

The company has fully secured capacity of leading-edge wafers and high-bandwidth memory through 2028, he said on Wednesday.

(Reporting by Joel Jose and Arsheeya Bajwa in Bengaluru; Editing by Vijay Kishore)