Sat, Dec 14, 2024 page9

• Broadcom stock soars on high demand for AI chips

  • Bloomberg
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  Broadcom Inc, a chip supplier for Apple Inc and other big tech companies, rallied in premarket trading after predicting a boom in demand for its artificial intelligence (AI) chips.

  Sales of AI products would gain 65 percent in the fiscal first quarter, far faster than its overall semiconductor growth of about 10 percent, the company said during a post-earnings conference call.

  The chipmaker also predicted that the potential market for AI components it designs for data center operators would reach as high as US$90 billion by fiscal 2027.

  

  The Broadcom Ltd logo is pictured outside an office complex in Irvine, California, on March 4, 2021.

  Photo: Reuters

  Like Nvidia Corp, Broadcom is positioning itself to be a major beneficiary of the AI spending frenzy. The company has won two major new hyperscale customers — the biggest operators of data centers, Broadcom chief executive officer Hock Tan said.

  The stock rose as much as 15 percent in premarket trading on Friday before New York exchanges opened, putting the share price on track for an all-time high if the gain holds when regular trading begins. It had been up 62 percent this year to close at US$180.66.

  Investors have piled into Broadcom’s stock this year, lured by AI optimism. The Palo Alto, California-based company had predicted that it would get more than US$10 billion in annual revenue from that market, outpacing other parts of its business. Ultimately, the number reached US$12.2 billion in the last fiscal year.

  AI revenue grew 220 percent during the year, fueled by demand for processors and networking components, Tan said.

  Demand for non-AI chips would be down in the first quarter, he said, adding that total sales would be US$14.6 billion in the period ending January, in line with estimates.

  Tan has assembled one of the most valuable companies in the chip industry through a string of acquisitions. He has also built a software unit that is approaching the scale of its semiconductor operations. That has made the company’s forecasts a bellwether for a broad swath of the technology industry.

  Profit was US$1.42 a share in the fourth quarter, excluding some items, the company said. Revenue rose to nearly US$14.1 billion in the period, which ended Nov. 3. Analysts had estimated US$1.39 a share in earnings and revenue of US$14.1 billion on average, according to data compiled by Bloomberg.

  Data center providers rely on Broadcom’s custom-chip design and networking semiconductors to build their AI systems. The company also sells components for cars, smartphones and internet access gear. Its push into software, meanwhile, includes products for mainframe computers, cybersecurity and data center optimization.

  Broadcom’s semiconductor division had revenue of US$8.23 billion in the fourth quarter, up 12 percent. Software sales grew nearly 200 percent to US$5.82 billion. The company is much larger than it was a year ago, partly because of its acquisition of VMware Inc, which it bought for roughly US$69 billion.

  Prior to the report, analysts raised concerns that Broadcom’s chip-design business was suffering from weaker demand. They cited the slower introduction of a new version of a Broadcom processor for Alphabet Inc.

  Apple is a top customer of Broadcom, which provides components for the iPhone. During earnings calls, Tan typically gives updates on Broadcom’s often-contentious relationship with that company, which he refers to as his “large North American customer.”
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