Broadcom Expects Decade-Long AI Chip Boom as Big Tech Invest Billions

Broadcom Inc AVGO chief Hock Tan expressed enormous conviction over the sustainability of the artificial intelligence frenzy as Alphabet Inc GOOG GOOGL Google, Meta Platforms Inc META and TikTok parent ByteDance splurged on designing custom processors that accelerate training and deployment of AI systems, the Financial Times reports.

Reportedly, OpenAI and Apple Inc AAPL also tapped Broadcom to develop their AI server chips to diversify their exposure to Nvidia Corp NVDA.

Broadcom stock has surged over 101% year-to-date.

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Tan told FT that he expected the demand to continue for at least ten years, citing their enormous return potential.

Tan stressed to the FT that clients were intensely ramping up AI infrastructure investment plans spanning three to five years.

He does not expect the phenomenon to lose steam until his clients run out of finances.

Last week, Tan told investors Broadcom could generate tens of billions of dollars in additional annual revenue from AI chips by 2027.

Tan’s experience and dealmaking prowess fuelled speculation of rescuing struggling chipmaker Intel Corp INTC. However, Tan claimed no hostile offers since 2018, when it was tracking Qualcomm Inc QCOM, which succumbed to regulatory opposition.

Tan backed his thesis by citing investments by OpenAI and Elon Musk’s xAI in data centers in 2024.

Tan told the FT that its customers will build clusters of up to 1 million AI chips by 2027. However, Tan said that even 1 million chips may not suffice the AI ambitions of OpenAI and Anthropic.

Broadcom’s stock price rallied 24% in a single day last Friday after its AI revenues had surged by 220% in fiscal 2024. The chipmaker added over $200 billion to its market cap, breaching the $1 trillion milestone for the first time.

Rosenblatt’s Hans Mosesmann expects Broadcom’s growing moat in expanding custom-chip (ASIC) AI and surging AI opportunities to intensify the rivalry with Advanced Micro Devices, Inc AMD and Nvidia. B of A Securities‘ Vivek Arya credited Broadcom with maintaining a position at customer Apple.

Investors can gain exposure to Broadcom through Amplify ETF Trust Amplify Cybersecurity ETF HACK and First Trust NASDAQ Technology Dividend Index Fund TDIV.

Price Action: AVGO stock closed lower by 2.37% at $218.32 Thursday.

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