The AI hardware sector is in need of good news, amid uncertainty over the boom’s longevity—and Broadcom has just delivered.
The U.S. maker of chips and data-center infrastructure on Thursday beat Wall Street’s expectations by reporting quarterly revenue of $14.9 billion, versus analyst forecasts of $14.76 billion. Although its share price had closed 6.3% down earlier in the day, it soared by as much as 14% in extended trading.
Broadcom’s big play in the AI market is the custom chips—known as application-specific integrated circuits or ASICs—that it makes for “hyperscaler” customers like Google and Meta. (OpenAI has reportedly also turned to Broadcom to help design its first custom chips.) These are cheaper than Nvidia’s market-leading chips, and by their nature also more optimized for the needs of the companies that order them
"Broadcom's record first quarter revenue and adjusted EBITDA were driven by both AI semiconductor solutions and infrastructure software,” said Broadcom president and CEO Hock Tan on Thursday.
Revenues for the fiscal quarter that ended on Feb. 2 were up 25% year-on-year, but those specifically for Broadcom’s AI offerings were up 77%, reaching $4.1 billion. “We expect continued strength in AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in [custom AI accelerators] and connectivity solutions for AI data centers,” said Tan.
AI shares have been sliding recently, for a couple of reasons. Firstly, no one is sure how long the big AI companies will keep investing tens of billions of dollars in new chips, given that AI is as yet not a big profit driver.
But U.S. President Donald Trump’s mania for tariffs is also highly problematic. Trump wants to cancel the CHIPS Act, which was introduced under President Joe Biden as a way of incentivizing the onshoring of semiconductor manufacturing through grants and loans. Instead, he wants to force companies to bring their manufacturing to the U.S. by introducing massive tariffs on chip imports—particularly those from Taiwan, the world’s chipmaking epicenter.
As a result of all this uncertainty, Nvidia’s share price has dropped by 20% so far this year, while Broadcom’s has fallen by 25%.
On Friday, Taiwan’s finance ministry reported that February’s exports were up 31.5% year-on-year, which Reuters reported was twice as much as analysts had expected. This wasn’t just a reflection of the AI boom; it was also a sign of customers racing to get their chips over from Taiwan before tariffs hit.
Broadcom and Taiwan’s TSMC have reportedly been considering buying separate parts of Intel, the legacy U.S. processor giant, which is in dire straits thanks largely to its laggard status in the AI space. TSMC—the world’s biggest contract chipmaker—may pick up Intel’s U.S. factories, while Broadcom is reportedly mulling a bid for its chip-design side.
