Broadcom Shares Climb 6.5% After Key Signal, Bucking Market Weakness

Broadcom Inc. (AVGO) shares surged 6.5% on Thursday, bucking the broader market weakness, after the company's CEO, Hock Tan, announced that Broadcom is developing custom AI chips with three large cloud customers. This news comes as a significant vote of confidence in Broadcom's AI capabilities and its potential for future growth in the AI market.



Broadcom's AI XPUs have seen soaring demand due to the boom in generative AI infrastructure. For the year, the company said AI revenue jumped 220% to $12.2 billion. Some of that growth is from ethernet networking parts, which are used to tie together thousands of AI chips. Broadcom is seeing an opportunity over the next three years in AI, with massive specific hyperscalers beginning their respective journeys to develop their own custom AI accelerators.



Tan said Broadcom is currently developing AI chips with three very large customers, and he expects each of them to deploy 1 million AI chips in networked clusters by 2027. The total market opportunity for its AI chips, which it calls XPUs, as well as parts for AI networking could be between $60 billion and $90 billion by 2027.

Broadcom's recent acquisition of VMware, a leading provider of virtualization and cloud infrastructure software, has also played a significant role in driving its share price and overall growth strategy. The acquisition added $21.5 billion to Broadcom's revenue in fiscal year 2024, representing a significant portion of the company's overall growth. As a result, Broadcom's share price has seen significant growth, with analysts predicting an increase of 18.72% from the current stock price of $187.48.



In conclusion, Broadcom's shares climbed 6.5% after the company's CEO announced that Broadcom is developing custom AI chips with three large cloud customers. This news comes as a significant vote of confidence in Broadcom's AI capabilities and its potential for future growth in the AI market. Broadcom's recent acquisition of VMware has also played a significant role in driving its share price and overall growth strategy. As the AI market continues to grow, investors should keep a close eye on Broadcom's progress and potential opportunities.