(Bloomberg) — Broadcom Inc., a chip supplier to Apple Inc. and other major tech companies, rose to a market value of $1 trillion for the first time after predicting huge demand for its artificial intelligence chips.
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Sales of AI products will rise 65% in the first fiscal quarter, far faster than overall semiconductor growth of about 10%, the company said on a post-earnings conference call. The chipmaker also predicted that the addressable market for AI components it designs for data center operators would be as much as $90 billion in fiscal 2027.
Just like Nvidia Corp. Broadcom is positioning itself as a major beneficiary of the raging AI spending. And Chief Executive Officer Hock Tan said his company had won two major new hyperscaler customers – the largest data center operators.
The stock rose as much as 21% to $218.29 after markets opened in New York on Friday, the biggest rally since March 2020.
Investors have piled into Broadcom stock this year, lured by AI optimism. The Palo Alto, California-based company had forecast it would generate more than $10 billion in annual revenue from that market, surpassing other parts of its business. Ultimately, this number reached $12.2 billion last fiscal year.
AI revenues rose 220% over the year, fueled by demand for processors and networking components, Tan said. Demand for non-AI chips will decline in the first quarter. Total sales will reach $14.6 billion through January, in line with estimates.
Tan has assembled one of the most valuable companies in the chip industry through a series of acquisitions. He has also built a software unit that approximates the size of its semiconductor business. That reach makes the company’s forecasts a gauge of demand across a broad swath of the technology industry.
Fourth-quarter earnings were $1.42 per share, excluding some items, the company said. Revenue rose to nearly $14.1 billion in the period ending Nov. 3. Analysts had estimated a profit share of $1.39 and revenue of an average of $14.1 billion, based on data compiled by Bloomberg.
Data center providers rely on Broadcom’s custom chip design and network semiconductors to build their AI systems. The company also sells parts for cars, smartphones and Internet access equipment. The company’s emphasis on software, meanwhile, includes products for mainframe computers, cybersecurity and data center optimization.
Broadcom’s semiconductor division had fourth-quarter revenue of $8.23 billion, up 12%. Software sales grew nearly 200% to $5.82 billion. The company is much bigger than a year ago, partly because of its acquisition of VMware Inc., which it bought for about $69 billion.
Ahead of the report, analysts expressed concern that Broadcom’s chip design business was suffering from weaker demand. They cited the slower rollout of a new version of a Broadcom processor for Alphabet Inc.
Apple is a top customer of Broadcom, which supplies components for the iPhone. During earnings calls, Tan typically provides updates on Broadcom’s often contentious relationship with that company, which he calls its “major North American customer” or some other vague term.
Bloomberg News previously reported that Apple would begin moving away from a key Broadcom wireless chip starting next year. The iPhone maker has replaced suppliers’ components with in-house versions, a trend that chip maker Qualcomm Inc. has also seen. will meet.
Tan said on the call that Broadcom remained very engaged with Apple on multi-year roadmaps for various technologies. He also said Broadcom remained open to acquisitions.
“That’s been a core part of our strategy and business model of this company for the last 10 years,” he said.
–With help from Subrat Patnaik.
(Updates with the size and scope of the opening share will be moved to the first and fourth paragraphs.)
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