Broadcom’s AI chip revenue projections challenge Nvidia’s dominance and highlight demand for specialised AI processors amidst global challenges.
The global AI boom has triggered an unprecedented transformation in the semiconductor industry, with demand for specialised AI chips reaching historic heights.
However, the industry is navigating complex challenges, including supply chain constraints, increasing competition for technological supremacy between major economies and geopolitical tensions affecting chip manufacturing.
The strategy of this industry is particularly important given recent geopolitical developments, including US export controls on advanced chips to China and massive government investments in domestic semiconductor manufacturing capabilities across the US, Europe and Asia.
In this context, Broadcom’s latest market forecasts have highlighted both the scale of AI chip demand and the emerging shifts in industry dynamics amongst these challenges.
The announcement is further significant given the broader context of the AI chip market, which has been predominantly dominated by Nvidia, as Broadcom’s emergence in the AI chip space signals a potential restructuring of the global AI chip supply chain.
The company’s transformation from a traditional semiconductor manufacturer to a key AI chip producer reflects the broader industry-wide pivot towards AI, where the ability to design and manufacture specialised AI processors has become a critical differentiator.
Broadcom’s AI revenue projections fuel market optimism
Broadcom’s position in the AI chip market has been further solidified by its shares experiencing a substantial 14% increase following its announcement of AI chip demand forecasts.
KEY FACTS:
- Broadcom’s fiscal year 2024 revenue grew 44% year-over-year to US$51.6bn
- AI revenue surged 220% year-on-year to US$12.2bn in fiscal 2024
- Semiconductor revenue hit a record US$30.1bn, driven by AI chips and networking
Showing further potential for the company, it also reports demand for its custom AI processors is expected to continue rising in the coming years.
Based on premarket share movements, the company was poised to add approximately US$120bn to its market value of US$843bn.
“Broadcom’s fiscal year 2024 revenue grew 44% year-over-year to a record US$51.6bn, as infrastructure software revenue grew to US$21.5bn, on the successful integration of VMware,” the company Broadcom acquired for enterprise IT and cloud solutions, says Hock Tan, President and CEO of Broadcom.
“Semiconductor revenue was a record $30.1bn driven by AI revenue of US$12.2bn. AI revenue which grew 220% year-on-year was driven by our leading AI XPUs and Ethernet networking portfolio.”
According to Reuters, he also states that the company anticipates the AI market to present a revenue opportunity ranging between US$60bn and US$90bn for fiscal 2027.
Moreover, he revealed that Broadcom had secured two major hyperscaler customers, referring to large cloud computing firms.
Market share and competitive positioning
Broadcom also reported that it had captured more than US$12bn of the total serviceable AI revenue, estimated to be between US$15bn and US$20bn in fiscal 2024.
This figure encompasses both custom AI chips and networking equipment used in data centres.
Reuters reports that TD Cowen analysts extrapolated from these figures, suggesting that if Broadcom maintains its approximately 70% market share through fiscal 2027, its AI revenue could exceed US$50bn.
Broadcom’s success in attracting major technology companies looking to reduce their dependence on Nvidia’s supply-constrained and costly AI processors has contributed to its stock’s more than 62% increase year-to-date.
Implications for the semiconductor industry
Broadcom’s forecast has had a ripple effect on the semiconductor sector.
Shares of rival companies such as Marvell Technology, which gained 5.3%, also saw increases.
Meanwhile, other semiconductor firms like Micron Technology, Advanced Micro Devices and Taiwan Semiconductor Manufacturing Company experienced share price rises as well.
The optimism surrounding Broadcom’s AI chip forecast has extended beyond the company itself, lifting sentiment across the Nasdaq index, which has been buoyed by ongoing enthusiasm for AI.
