Broadcom Shares Set for Biggest Surge Since 2020 on AI Chip Boom

(Bloomberg) — Broadcom Inc., a chip supplier for Apple Inc. and other big tech companies, is headed for its biggest share-price rally in more than four years after predicting a boom in demand for its artificial intelligence chips.

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Sales of AI products will gain 65% in the fiscal first quarter, far faster than its overall semiconductor growth of about 10%, the company said during a post-earnings conference call. The chipmaker also predicted that the addressable market for AI components that it designs for data center operators would reach as high as $90 billion by fiscal 2027.

Like Nvidia Corp., Broadcom is positioning itself to be a major beneficiary of the AI spending frenzy. And Chief Executive Officer Hock Tan said his company had won two major new hyperscaler customers — the biggest operators of data centers.

The stock rose as much as 19% in premarket trading on Friday before New York exchanges opened, putting its share price on track for an all-time high and bringing it closer to a $1 trillion market valuation. The shares have gained 62% this year, giving the company a market value of $843.8 billion as of Thursday’s close.

Investors have piled into Broadcom’s stock this year, lured by AI optimism. The Palo Alto, California-based company had predicted that it would get more than $10 billion in annual revenue from that market, outpacing other parts of its business. Ultimately, the number reached $12.2 billion in the last fiscal year.

AI revenue grew 220% during the year, fueled by demand for processors and networking components, Tan said. Demand for non-AI chips, meanwhile, will be down in the first quarter. Total sales will be $14.6 billion in the period, which runs through January, in line with estimates.

Tan has assembled one of the most valuable companies in the chip industry through a string of acquisitions. He also has built a software unit that’s approaching the scale of its semiconductor operations. That reach makes the company’s forecasts a bellwether for demand over a broad swath of the technology industry.

Profit was $1.42 a share in the fourth quarter, excluding some items, the company said. Revenue rose to nearly $14.1 billion in the period, which ended Nov. 3. Analysts had estimated $1.39 a share in earnings and revenue of $14.1 billion on average, according to data compiled by Bloomberg.

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