Broadcom Shares Soar as AI Revenue Soars 220%

Broadcom soars 18% and boosts technology in the US, with a 220% increase in AI revenue and projection of massive growth in the sector

Broadcom shares rose 18% in premarket trading on Wall Street, triggering a rally in technology stocks after the chipmaker reported huge gains in artificial intelligence revenue and projected “massive” growth in the sector.

Futures indicated the tech-heavy Nasdaq Composite would open 0.8% higher and the S&P 500 0.4%. Shares of Nvidia, the leading maker of AI-related semiconductors, rose 1.6%.

Broadcom’s confident outlook for its business supplying the chips needed for generative AI caught analysts’ attention, even as its quarterly results after the closing bell on Thursday were roughly in line with market expectations. The group’s AI-linked revenues soared 220% in the fourth quarter compared to the same period in 2023.

“We see our opportunity over the next three years in AI as huge,” Hock Tan, its chief executive, told analysts, discussing the investment plans of its biggest customers. “For each of them, this represents a multi-year journey, not a quarter-to-quarter journey.”

Tan estimated that the potential AI market for Broadcom by 2027 would be between $60 billion and $90 billion, up from less than $20 billion currently.

“We are very well positioned to achieve leading market share in this opportunity,” Tan added, although he cautioned that gains would not be linear but would vary from quarter to quarter.

Analysts at JPMorgan Chase raised their price target on the stock to $250 from $210, adding: “Even applying a more conservative market share assumption, we can see Broadcom’s AI business growing to 40% revenue. 50 percent or more (compound annual rate) in the coming years.”

Broadcom shares have gained 62 percent this year to about $180 ahead of Thursday’s results, trailing AI chip leader Nvidia, which has gained 180 percent. Broadcom shares traded around $213 in pre-market trading on Friday, leaving the company poised to add more than $140 billion in market value.

Leading AI companies like OpenAI have been looking for ways to reduce their dependence on Nvidia’s cutting-edge technology and deepen their supply chains.

“AI is still driving the bus,” Citigroup analysts said.

With information from Financial Times*