Broadcom Partners with OpenAI to Develop AI Chip for Internal Use by 2026

Broadcom has partnered with OpenAI to develop an AI chip for internal use by 2026. The collaboration aligns with Broadcom's strategic goal of enhancing AI capabilities and follows impressive quarterly earnings, including a 63% increase in AI revenue. Broadcom's solid financial performance and promising AI-related ventures have reinforced its presence in the semiconductor space.

Broadcom (AVGO) has recently announced a partnership with OpenAI to develop a custom AI chip for internal use by 2026. This collaboration aligns with Broadcom's strategic goal of enhancing AI capabilities and follows the company's impressive quarterly earnings, including a 63% increase in AI revenue [1]. The partnership aims to reduce OpenAI's reliance on third-party hardware while improving AI model efficiency and cutting costs.

The collaboration between Broadcom and OpenAI is part of a broader trend toward custom hardware in the AI industry. By developing custom AI chips, Broadcom aims to strengthen its market presence and diversify its revenue streams. The partnership also reflects Broadcom's commitment to innovation and its ability to convert AI demand into free cash flow, a key factor in its financial resilience [2].

In Q3 2025, Broadcom's AI semiconductor revenue surged by 63% year-over-year, reaching $5.2 billion, driven by custom chips for hyperscalers and cloud infrastructure [3]. The company's financials reinforce its strategic value, with free cash flow representing 37% of revenue and adjusted EBITDA margins at 63% [3]. This operational efficiency allows Broadcom to invest in R&D and return value to shareholders through dividends.

While analyst sentiment is mixed, with Cantor Fitzgerald raising targets to $350 and MIT warning of AI ROI overestimation risks, the fundamentals remain robust [3]. Broadcom's Q4 2025 guidance projects AI semiconductor revenue of $6.2 billion, a 66% year-over-year increase, and total revenue of $17.4 billion [3]. The company's ability to maintain its market share in the custom AI chip segment, coupled with the U.S. CHIPS Act investments reducing geopolitical supply chain risks, positions it well for future growth.

In conclusion, Broadcom's partnership with OpenAI to develop a custom AI chip is a strategic move that aligns with its long-term goals of enhancing AI capabilities and strengthening its market position. The company's solid financial performance and promising AI-related ventures reinforce its presence in the semiconductor space. Investors should carefully monitor earnings forecasts and developments in AI initiatives to understand their impact on Broadcom's future financial performance.

References:
[1] Simply Wall St. (2025). Broadcom (AVGO) partners with OpenAI to develop AI chip for internal use. Retrieved from https://simplywall.st/stocks/us/semiconductors/nasdaq-avgo/broadcom/news/openai-partners-with-broadcom-avgo-to-develop-ai-chip-for-in
[2] AInvest. (2025). Broadcom stock surges 12% after OpenAI AI chip partnership. Retrieved from https://www.ainvest.com/news/broadcom-stock-surges-12-openai-ai-chip-partnership-2509/
[3] AInvest. (2025). Broadcom dominates AI semiconductors with $5.2B revenue surge. Retrieved from https://www.ainvest.com/news/optimal-time-buy-broadcom-avgo-record-revenue-ai-driven-growth-2509/