Broadcom stock hits record high on positive guidance, CEO comments

The California-based company Palo Alto’s shares gained 14% in aftermarket trade, following the statement by the CEO Hock Tan saying, he anticipates a revenue growth from AI in the range of $60 billion to $90 billion in 2027.

Tan said three ‘hyperscale’ customers are likely to set up thousands of artificial intelligence chip clusters within a short period.

Technology giants have been scrambling to free themselves from expensive, supply-constrained AI processors made by leader Nvidia, which works well for Broadcom which makes innovative custom artificial intelligence chips for what they call hyperscalers.

Broadcom’s networking chips which aid in moving around great amounts of data that applications like OpneAI’s ChatGPT use are in high demand since businesses tend to double investments on GenAI infrastructure.

"Broadcom's excellent performance is to be expected; here's one of the companies benefiting from the AI-invigorated global semiconductor industry--and its AI revenue has climbed 220 percent this year," eMarketer analyst Jacob Bourne added.

The company estimates revenue of approximately $14.6 billion during the first quarter compared to analysts' average estimate of $14.57 billion according to records compiled by LSEG.

Analysts, however, raised eyebrows regarding the actual future business potential from Apple, one of Broadcom's prime wireless customers, now that the iPhone manufacturer is busy designing more of its chips in-house.

According to Bloomberg News on Thursday, Apple has a plan to switch to a homegrown chip for Bluetooth and Wi-Fi connections which will start next year. Thus, it replaces some parts recently provided by Broadcom.

Even though Broadcom has to contend with intensely close competition from Nvidia's ethernet-like Infiniband products, the company still stands to reap some benefits from the growth of AI data centers as one of the largest providers of advanced networking equipment.

"Broadcom will continue to remain a relevant player in the custom AI ASIC market along with companies such as Marvell because tier-1 hyperscalers do have in-house chips," said Summit Insights senior analyst Kinngai Chan.

The company declared its fourth quarter shake revenue to reach $14.05 billion, which is an increase of more than 50 percent compared to the year before. According to analysts, expected earnings were $14.09 billion.

Also, Broadcom earned an adjusted $1.42 per share against estimates of $1.38 per share.