Broadcom Corporation saw its stock price climb approximately 7% in pre-market trading Thursday following the company’s announcement that it anticipates artificial intelligence chip revenues will surpass $100 billion by 2027, marking its aggressive entry into a sector dominated by Nvidia.
Technology giants including Alphabet, Microsoft, Amazon, and Meta are projected to invest over $600 billion this year in artificial intelligence infrastructure development, creating increased demand for semiconductors, servers, data storage, and network hardware.
The semiconductor manufacturer plans to provide 3 gigawatts of tensor processing units for artificial intelligence applications to Anthropic by 2027, while also preparing to deliver OpenAI’s inaugural AI chip with more than 1 gigawatt capacity during the same timeframe.
These production volumes position Broadcom to compete at similar levels with recent artificial intelligence chip contracts secured by Nvidia and AMD.
Market observers remain skeptical about whether substantial AI investments will produce adequate returns to support current high stock valuations, contributing to recent steep drops among the world’s most valuable technology companies.
Year-to-date performance shows Broadcom’s shares declining roughly 8.3%, while Nvidia has fallen approximately 2%.
“The AI spend overhang will still linger, but Broadcom made a strong case for their AI revenue to outgrow the market,” analysts at Jefferies stated.
For its second quarter, Broadcom forecasts revenue of approximately $22 billion, exceeding analyst expectations of $20.56 billion according to LSEG data. The company projects AI chip revenue of $10.7 billion for the quarter.
Additionally, Broadcom unveiled a new stock buyback program worth up to $10 billion, set to run through year-end.
