The value of Broadcom shares showed growth on Friday, December 13, which amounted to 14%, and an indicator of the market capitalization of this chip manufacturer, which headquarters are located in Palo Alto. California is approaching the iconic $1 trillion mark.
The mentioned dynamic of securities of the specified company is observed after the brand released a forecast according to which demand for its custom artificial intelligence microcircuits in the coming years will be on an upward trajectory.
Broadcom was on track to add approximately $120 billion to its market capitalization. In this case, it implies the movement of the market value far from the current $843 billion mark. The corresponding upward trajectory is based on the dynamic of shares of the chip manufacturer in the premarket. This upward movement is because the company’s revenue forecast exceeded Wall Street’s preliminary expectations. The shares of the competitor, which is Marvell Technology, showed an increase of 5.3%.
Broadcom is a reliable supplier of products to large technology companies that, by developing their own advanced custom microcircuits, seek to reduce dependence on expensive and shipment-constrained artificial intelligence processors elaborated by Nvidia, one of the main beneficiaries of the so-called AI boom. Nvidia’s market capitalization has crossed the $3 trillion mark this year.
Since the beginning of the current year, the value of Broadcom shares has increased by more than 60%.
The company’s chief executive officer Hock Tan said last Thursday, December 12, that he expects the artificial intelligence market in fiscal 2027 to provide the brand with the opportunity to generate revenue in the range of $60 billion to $90 billion. Mr. Tan also noted that Broadcom had won two major hyperscaler customers. In this case, it is implied that large cloud companies are meant.
Broadcom predicts that in the first quarter of fiscal 2025, its revenue will reach approximately $14.6 billion. The LSEG consensus forecast provided that the corresponding figure would be $14.57 billion. It is worth clarifying that the first quarter of the 2025 fiscal will end on February 2.
The company’s revenue for the 2024 fiscal, which ended November 3, was fixed at $51.6 billion. It is worth noting that the corresponding figure is a record. The company’s revenue for the mentioned period showed an increase of 44% compared to the indicator for the previous fiscal year. In this case, there are strong arguments in favor of calling Broadcom the beneficiary of the artificial intelligence boom. Also, the company’s results underline the growth of AI as a large-scale technology, gradually becoming the core of the current stage of the digital development of human civilization.
Broadcom’s infrastructure software generated revenue of $21.5 billion in fiscal 2024. In this case, a significant factor influencing the result was the successful integration of VMware
The company’s revenue from semiconductors for the fiscal 2024 reached a record high of $30.1 billion. It is worth noting that this indicator includes earnings from artificial intelligence. The company’s revenue from AI for the 2024 fiscal was fixed at $12.2 billion. This indicator showed an increase of 220% year-on-year. The company noted that the corresponding result was driven by its leading AI XPUs and Ethernet networking portfolio.
Broadcom manufactures both custom artificial intelligence chips and network equipment used in data centers.
TD Cowen’s preliminary estimate envisages that extrapolating approximately 70% of the market share to fiscal 2027 will mean that the microcircuits manufacturer’s revenue from artificial intelligence will exceed the $50 billion mark. The company also noted that the possibility of revenue in the range of $60 billion to $90 billion is difficult to prove or disapprove.
Data compiled by LSEG indicates that at least 16 brokerages have increased their price targets for Broadcom’s shares. The median view has grown to $210. This figure is 16% higher than the stock’s last closing price. Broadcom’s 12-month forward price-to-earnings ratio is 29.8. The corresponding Nvidia and Marvell indicators are at 31.03 and 41.14, respectively.
Bernstein analyst Stacy Rasgon said Broadcom went out on its way to give investors a reason to dream. In this case, it implies an impressive picture of prospects for three years with potential revenue from $60 billion to $90 billion due to the use of artificial intelligence by the current clients and with more possible given two new potential clients currently engaged. Stacy Rasgon also stated that the AI story seems to really be coming into its own.
At the same time, some analysts said it was likely that the level of financial performance from Broadcom’s interaction with one of its largest customers, which is Apple, could decrease. The relevant assumptions are related to the fact that the mentioned client is currently developing its own chips. The media released information according to which Apple’s plans envisage switching to a homegrown microcircuit for Bluetooth and Wi-Fi connections starting next year. This means replacing some of the components that are currently provided by Broadcom.
Despite increased competition, Broadcom continues to be a beneficiary of the expansion of artificial intelligence data centers. The company remains within the limits of the status confirmed by objective data as one of the largest providers of advanced network equipment.
Summit Insights senior analyst Kinngai Chan stated that Broadcom will continue to be a relevant player in the custom AI ASIC market together with companies like Marvell as tier-1 hyperscalers will continue to introduce their in-house chips.
Application-Specific Integrated Circuits, or ASICs, are chips that are designed for specific tasks or apps.
A kind of traditional status of Broadcom in the context of its market position in terms of the products offered provides for the positioning of the brand as a microcircuit manufacturer. At the same time, the company has actually transformed into a technology conglomerate. Deals such as the acquisition of VMware, which specializes in cloud computing, contributed to the corresponding structural changes. The value of this business agreement amounted to $69 billion.
Jacob Bourne, an analyst at eMarketer, said that Broadcom’s strong performance is not a surprise. In this context, it was noted that this company is one of the firms benefiting from artificial intelligence invigorating the global semiconductor industry.
Currently, AI is actually the main driving force of the technology sector. This does not mean that the relevant sector in terms of development prospects and in the context of commercial indicators would have fallen into the abyss of negative readings without artificial intelligence, but digital thinking systems have already made and continue to make a significant and most sensitive contribution to its positive dynamic at the current stage. AI is actually the main technology of modernity. Artificial intelligence has already successfully demonstrated its ability to optimize many workflows at a fundamental level, providing increased efficiency, and the ability to be a working tool itself. AI can also process huge amounts of information, including in the context of analytical comprehension of the relevant data. Moreover, artificial intelligence can generate original media content. Besides, the most ambitious futurological forecasts envisage that over time AI will transform into an autonomous form of consciousness capable of independent evolution and surpassing the human mind in terms of the level of cognitive development. Many experts also call artificial intelligence a source of conversion of the world as a space for the existence of human civilization in its economic, social, and cultural dimensions. At the same time, this impressive groundbreaking movement of digital thinking systems forward is impossible without such a basic material component as a chip. Against the background of the relevant circumstance, it is natural that companies developing and manufacturing microcircuits are the beneficiaries of the artificial intelligence boom, improving their financial performance as part of the rapid growth of the business.
As we have reported earlier, ByteDance & Broadcom Work on Advanced AI Chip.
