FT: OpenAI set to begin mass production of AI chips with Broadcom

FT: OpenAI set to begin mass production of AI chips with Broadcom

OpenAI, the renowned AI company, is set to commence mass production of AI chips in collaboration with Broadcom. This strategic partnership underscores the growing demand for advanced semiconductor solutions in the AI sector. Broadcom, known for its AI semiconductor expertise, is well-positioned to capitalize on this trend.

According to analysts at UBS, big tech companies are projected to spend $375 billion on AI infrastructure this year, with that figure expected to rise to $500 billion next year [1]. The primary expense in building out AI data centers is semiconductors, making companies like Nvidia and Broadcom significant beneficiaries of this growth.

Broadcom's AI business has seen remarkable growth. In Q3 2025, Broadcom reported AI semiconductor revenue of $5.2 billion, representing a 63% year-over-year increase [2]. This surge was driven by custom chips for hyperscalers and cloud infrastructure, as well as strategic partnerships with Google and Meta. Broadcom's AI-related revenue now accounts for approximately 30% of its total sales, with management expecting this figure to climb further.

The partnership between OpenAI and Broadcom is expected to leverage Broadcom's AI chip technology, which is already a leading player in the market. Broadcom's acquisition of VMware has also contributed to its growth, with over 87% of its customers transitioning to the VMware Cloud Foundation [1]. This integration has resulted in double-digit growth in annual recurring revenue.

However, Broadcom's stock is currently trading at a high forward P/E ratio of 45, making it relatively expensive compared to other semiconductor stocks. Despite its robust growth in AI chip sales and strong margin improvement from VMware, the company's overall growth rate is around 20% year-over-year, which may not justify its high valuation multiple [1].

In contrast, Taiwan Semiconductor Manufacturing (TSMC), which prints and packages chips for companies like Nvidia and Broadcom, is seen as a more promising candidate to reach the $2 trillion market cap by 2028. TSMC benefits from a virtuous cycle, maintaining its technology lead and market share, while offering enough capacity to meet growing demand [1].

The collaboration between OpenAI and Broadcom is likely to enhance Broadcom's position in the AI chip market, but investors should consider the company's valuation and overall growth prospects before making investment decisions. As the AI semiconductor market continues to grow, companies like Broadcom and TSMC are well-positioned to benefit from this trend.

References:
[1] https://www.fool.com/investing/2025/08/30/prediction-this-artificial-intelligence-ai-semicon/
[2] https://www.ainvest.com/news/optimal-time-buy-broadcom-avgo-record-revenue-ai-driven-growth-2509/