Improved Figures Boost Broadcom's Performance: Impressive Numbers Push Shares Up by 5.9%, OpenAI Adds a Billion More Customers
Broadcom, a leading technology company, has made significant strides in the AI semiconductor market, securing contracts worth over $10 billion with tech giants Apple and Samsung for application memory chips. This announcement comes as part of a broader strategy to expand its presence in the AI sector.
In a notable move, Broadcom is partnering with OpenAI, the renowned AI research laboratory, for the development and production of an AI accelerator starting in 2026. This partnership enters a market currently dominated by Nvidia, signalling a potential shift in the industry landscape.
Initially, OpenAI will utilise the newly developed chip for its internal purposes. Broadcom's CEO, Hock Tan, revealed the partnership on Thursday, stating that Broadcom had received these orders from OpenAI.
Tan has also upgraded Broadcom's network equipment to improve data exchange between expensive graphics chips that form the core of AI data centres. This move is expected to significantly improve Broadcom's outlook for fiscal 2026.
Broadcom's stock, the third-largest in the Nasdaq 100 index, has more than doubled from its April low, increasing the company's market capitalization by approximately $730 billion. The company's revenue for the fourth fiscal quarter, which ends in October, is projected to be approximately $17.4 billion.
The growth rate for AI revenues in fiscal 2026 is expected to "accelerate quite noticeably" from previous estimates. Broadcom's revenue from AI semiconductors for the third quarter was $5.2 billion, compared to an estimate of $5.11 billion. This strong performance has been met with a muted reaction from investors, but the stock rose more than 3% during the conference call.
Broadcom is also making progress in finding customers seeking customized chips for AI tasks. Accelerators, essential for AI development at large tech companies like Meta Platforms and Microsoft, are at the heart of this strategy. The first chips in this series are expected to be delivered next year.
Analysts had forecast $5.82 billion for the fourth quarter's AI semiconductor revenue, but Broadcom expects revenue from AI semiconductors to reach $6.2 billion in the fourth quarter. Non-GAAP earnings per share for the third quarter were $1.69, exceeding the analysts' prediction of approximately $1.67 per share.
Broadcom's strategic partnerships and strong financial performance position the company well for continued growth in the AI semiconductor market.
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