BroadcomShares rose nearly 5% on Thursday as CEO Hock Tan expressed strong demand for the company’s chips amid a boom in artificial intelligence.
He told analysts on Wednesday that he expects AI chip revenue to “significantly exceed $100 billion” in 2027 as demand for custom silicon design increases.
That beat many bullish estimates from Wall Street analysts, who now expect higher potential upside after Tan said the company is close to 10 gigawatts of capacity between six customers.
Analysts at JPMorgan estimate the company could reach between $12 billion and $15 billion in revenue per gigawatt by 2027, and have raised estimates of the firm’s AI revenue to “traditionally” $120 billion or higher.
The company’s “leadership in AI networking and custom silicon enables lower resolution costs for its hyperscaler customers, and we see cost reductions continuing at pace with market leader Nvidia,” analysts at Goldman Sachs wrote.
The comments came alongside better-than-expected quarterly results from Broadcom, in which AI revenue doubled due to AI acceleration and networking demand.
In the past few months, chipmakers have faced shortages in high-bandwidth memory, as AI demand has depleted supply. But Tan told analysts that the company has secured memory and leading-edge wafer supply by 2028.
Tan managed to convince investors of Broadcom’s sustainable growth trajectory, allaying fears about the company’s profitability and allaying questions about whether Broadcom would weigh on shipping margins more racks packed with AI chips. In comparison, major AI chipmaker Nvidia’s blowout report last month was not enough to convince investors.
“We’ve got our yields, we’ve got our costs to the point where the model we have in AI is fairly consistent with the models we have in the rest of the semiconductor business,” Tan told analysts.
More hyperscalers making their own chips have raised fears that Broadcom could be forced out of the market. However, Tan said it will be difficult to compete against the juggernaut Nvidia The company should benefit “for many years to come.”
Big language model makers “can’t have a good enough chip,” he said. “You need the best chips because you’re competing against other LLM players, and above all, you’re competing against Nvidia, who won’t let their guard down in any way.”
Broadcom’s upbeat results benefited Credo And Amphenol Bets on customers choosing to connect to copper, the chipmaker’s core business segment — through optical technology to connect AI servers. The shares rallied 10% and 4%, respectively.
Lumentum And CoherentIt manufactures new optical technology, less than 4% each.
— CNBC’s Jordan Novett and Katie Tarasov contributed reporting
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