Broadcom provided welcome news to investors concerned that the buildout of artificial intelligence infrastructure had run out of steam. AVGO stock jumped Friday after its fiscal first-quarter report.
Broadcom late Thursday delivered a beat-and-raise earnings report. The fabless chipmaker and infrastructure software provider earned an adjusted $1.60 a share on sales of $14.92 billion in the quarter ended Feb. 2. On a year-over-year basis, Broadcom earnings increased 45% while sales advanced 25%.
For the current quarter ending May 4, Broadcom forecast revenue of $14.9 billion, up 19% year over year.
On a conference call with analysts, Broadcom announced that it had scored two additional AI chip customers, bringing its total to seven. It currently is supplying custom AI chips for Alphabet's Google, Facebook parent Meta Platforms and TikTok owner ByteDance. It also reportedly is designing chips for Apple and OpenAI.
The two new customers could be xAI and Oracle, Raymond James analyst Srini Pajjuri said in a client note. Another possible customer is the alliance of SoftBank and Arm, JPMorgan analyst Harlan Sur said in a note.
On the stock market today, AVGO stock rose 8.6% to close at 194.96.
"Broadcom's results support our view that the AI trade remains alive and well as hyperscalers and enterprises continue to view AI as top priority to increase productivity and remain competitive," William Blair analyst Sebastien Naji said in a client note. He rates AVGO stock as outperform.
Broadcom's report highlights the competitive advantages of application-specific integrated circuits (ASICs) for AI, JPMorgan's Sur said.
"These engagements underscore Broadcom's expanding design win pipeline and confirm our belief that internally developed custom ASIC silicon programs offer opportunities for differentiation, efficiency gains, and improved silicon economics," Sur said.
However, Pajjuri said some of Broadcom's AI chip engagements are still early. He rates AVGO stock as market perform, or neutral.
"We expect intense competition from Nvidia and there is no guarantee that new (Broadcom) customers will proceed with volume deployment of custom ASICs," he said.
In the AI chip market, Broadcom competes with rival ASIC designer Marvell Technology and makers of graphics processing units (GPUs) led by Nvidia.
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