Broadcom‘s stock surged about 5% on Thursday as CEO Hock Tan touted strong demand for the company’s chips amid the artificial intelligence boom.
He told analysts on Wednesday that he anticipates AI chip revenue in 2027 that’s “significantly in excess of $100 billion” as demand mounts for designing custom silicon.
That far surpassed many bullish estimates from Wall Street analysts, who now anticipate more potential upside after Tan said the company is nearing 10 gigawatts of capacity between six customers.
Analysts at JPMorgan estimate that the company can reach between $12 billion and $15 billion in revenue per gigawatt by 2027 and lifted the firm’s AI revenue estimates “conservatively” to $120 billion or more.
The company’s “leadership in AI networking and custom silicon enables the lowest inference cost for its hyperscaler customers, and we see it delivering ongoing cost reductions on pace with market leader Nvidia,” wrote analysts at Goldman Sachs.
The comments came alongside Broadcom’s better-than-expected quarterly results, in which AI revenue more than doubled due to AI accelerator and networking demand.
Over the last few months, chipmakers have grappled with a shortage in high-bandwidth memory as AI demand snaps up supply. But Tan told analysts that the company has secured memory and leading-edge wafer supply through 2028.
Tan managed to convince investors of Broadcom’s sustainable growth trajectory, allaying fears about the company’s profitability and questions about whether Broadcom shipping more racks packed with AI chips would weigh on margins. By comparison, leading AI chipmaker Nvidia’s blowout report last month wasn’t enough to convince investors.
“We have gotten our yields, we’ve gotten our cost to the point where the model we have in AI will be fairly consistent with the models we have in the rest of the semiconductor business,” Tan told analysts.
More hyperscalers making their own chips has also sparked some fears that Broadcom could get cut out of the market. However, Tan said the difficulty of competing against a juggernaut like Nvidia should benefit the company over “many years to come.”
Large language model makers “cannot afford to have a chip that is just good enough,” he said. “You need the best chips around because you’re competing against other LLM players, and most of all, you’re also competing against Nvidia, who is by no means letting their guard down.”
Broadcom’s upbeat results benefited Credo and Amphenol on bets that customers are opting for copper connectivity — the chipmaker’s core business segment — over optical technology to connect AI servers. Shares rallied 10% and 4%, respectively.
Lumentum and Coherent, which make newer optical tech, fell over 4% each.
— CNBC’s Jordan Novet and Katie Tarasov contributed reporting
Broadcom year-to-date stock chart.
