Broadcom has successfully joined the trillion-dollar market cap club, thanks to its strong performance in the artificial intelligence sector. CEO Hock Tan forecasts that the AI investment boom will continue until the end of the 2020s. He revealed that Broadcom's customers plan to build large-scale computing clusters equipped with millions of AI chips over the next three years, which will drive rapid market growth.
During the earnings call on December 12, Broadcom showcased impressive results. The company's AI-related revenue for fiscal year 2024 surged 220% year-over-year, reaching $12.2 billion. This growth is primarily attributed to strong demand for its AI XPU and Ethernet product lineup.
Hock Tan disclosed that Broadcom is collaborating with three major customers to develop AI chips, with plans to deploy a network cluster of one million chips by 2027. He anticipates that the total market size for XPU and AI networking components will reach $60 to $90 billion by 2027. Although Broadcom has not officially announced its customer list, analysts point out that its main partners include Google, Meta, and ByteDance.
In the AI hardware sector, Broadcom is continuously expanding its influence through partnerships with tech giants like OpenAI and Apple. As companies seek alternatives to Nvidia, Broadcom has become a key partner for AI hardware solutions. Notably, Apple is collaborating with Broadcom to develop its first AI server processor "Baltra," expected to go into mass production in 2026; OpenAI is also working with Broadcom to develop an AI inference processor, which is similarly planned for production in 2026.
Looking ahead, Wall Street is optimistic about Broadcom's prospects. Goldman Sachs has raised Broadcom's 12-month price target from $190 to $240. Morgan Stanley estimates that capital expenditures from Amazon, Google, Meta, and Microsoft will reach approximately $300 billion in 2024, potentially increasing further by 2026, with most of the investment directed towards fixed assets such as data centers.
During the latest earnings call, Hock Tan expressed optimism about the growth of Broadcom's AI business, particularly emphasizing the demand for custom AI accelerators. These developments signify that the AI chip market is entering a new stage of growth, and Broadcom is poised to play a more significant role in this wave of technological innovation.
