(Bloomberg) — Broadcom, a chip supplier to Apple and other big tech companies, rallied in late trading after predicting a boom in demand for its artificial intelligence chips.
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In a post-earnings conference call, the company said it expects sales of AI products to increase 65% in the first quarter, far outpacing the overall semiconductor growth rate of about 10%. The company also predicted that the addressable market for the AI components it designs for data center operators will reach $90 billion by fiscal year 2027.
Like Nvidia Corp., Broadcom also stands to be a major beneficiary of the AI spending frenzy. Chief Executive Officer Hock Tan said that the company has acquired two new major hyperscaler customers (the largest data center companies).
The stock price rose about 14% in extended trading after the announcement. By 2024, it had risen 62% to its close.
Investors have rushed into Broadcom stock this year, lured by AI optimism. The Palo Alto, Calif.-based company predicted it would generate more than $10 billion in annual revenue from the market, more than any other part of its business. Ultimately, that amount reached $12.2 billion in the last fiscal year.
Tan said AI revenue grew 220% in the same year, driven by demand for processors and networking components. Meanwhile, demand for non-AI chips will decline in the first quarter. As expected, total sales for the period ending in January are expected to be $14.6 billion.
Tan has built one of the chip industry’s most valuable companies through a series of acquisitions. He also built a software division that is approaching the size of the semiconductor business. This reach puts the company’s forecasts at the vanguard of widespread demand in the technology industry.
The company said its fourth-quarter profit was $1.42 per share, excluding certain items. Revenue for the period ended Nov. 3 rose to nearly $14.1 billion. Analysts had expected earnings of $1.39 per share and revenue of $14.1 billion, on average, according to data compiled by Bloomberg.
Data center providers rely on Broadcom’s custom chip designs and network semiconductors to build AI systems. The company also sells parts for cars, smartphones, and internet access equipment. Meanwhile, its foray into software includes products for mainframe computers, cybersecurity, and data center optimization.
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