Broadcom shares saw a notable increase Thursday following the company's announcement that it projects artificial intelligence chip sales to surpass $100 billion by 2027. This move positions Broadcom to compete in the AI chip market, currently dominated by Nvidia.
Major technology companies, including Alphabet, Microsoft, Amazon, and Meta, are set to invest over $600 billion in AI infrastructure this year, driving demand for essential components like chips, servers, storage, and networking equipment.
Broadcom plans to supply 3 gigawatts of tensor processing units for AI applications to Anthropic in 2027 and aims to deliver over 1 gigawatt of OpenAI's initial AI chip within the same timeframe. These projected volumes align Broadcom with recent large-scale AI chip deals from competitors like Nvidia and AMD.
Despite investor concerns about the return on investment for substantial AI spending and its impact on technology stock valuations, Broadcom's outlook remains strong. Analysts at Jefferies noted that while the "AI spend overhang will still linger," Broadcom has presented a compelling argument for its AI revenue to expand faster than the market.
For the second quarter, Broadcom forecasts revenue of approximately $22 billion, exceeding analysts' average estimate of $20.56 billion. The company also anticipates $10.7 billion in AI chip revenue for the quarter. Additionally, Broadcom announced a new share repurchase program valued at up to $10 billion, effective through the end of the year.