The AI economy is minting new royalty in American business—and Nvidia is not the only one wearing a crown. Fellow chipmaker Broadcom has also become one of Wall Street’s hottest stocks, and shares soared nearly 20% Friday after CEO Hock Tan told investors on the company’s quarterly earnings call that its AI business is only starting to explode.
The latest stock surge saw Broadcom’s market cap climb above $1 trillion, making it just the ninth U.S. Public company to reach the milestone. The only other companies that currently sport 13-figure valuations are the tech giants of the so-called “Magnificent Seven,” which are also major customers of the semiconductor giant. (In fact, Broadcom technically kicked Tesla out of the group in the fall, though the EV maker’s post-election rally has seen Elon Musk’s company regain its status.)
Nvidia and Broadcom have surged ahead of other chipmakers thanks to the AI frenzy. Nvidia has even periodically overtaken Apple as America’s largest company (though it also currently sits behind Microsoft) due its dominance in manufacturing the versatile graphic processing units, or GPUs, all but essential for training AI models. The company also established an competitive moat by aggressively pushing the proprietary software that runs on top of its chips.
Broadcom has emerged as Nvidia’s stiffest competition, however. The former’s AI revenue grew 220% to $12.2 billion this past quarter, pushing semiconductor revenue to a record $30.1 billion. The company said the increase was driven by its signature “XPU” chips, which are more customizable than traditional GPUs, as well as its Ethernet networking portfolio.
Tan also said the company added two major cloud customers during the quarter. That adds to the list of the three so-called “hyperscalers”—think of names such as Microsoft, Alphabet, and Meta—that Broadcom already serves.
More AI opportunity lies ahead
Bank of America raised its price target for the stock from $215, a threshold Broadcom crossed on Friday, to $250. The move implies another 38% of upside to shares, with managing director and senior analyst Vivek Arya noting his team projects the chipmaker’s AI revenues to more than double to $30 billion by 2027.
“We see our opportunity over the next 3 years in AI as massive,” Tan told analysts on the earnings call Thursday. “Specific hyperscalers have begun their respective journeys to develop their own custom AI accelerators or XPUs, as well as network these XPUs with open and scalable Ethernet connectivity. For each of them, this represents a multiyear, not a quarter-to-quarter journey.”
Broadcom’s surge helped drive the semiconductor index, commonly known as SOX, up almost 2% as of late Friday morning. Apart from the booming AI trade for Nvidia and Broadcom, the industry has struggled recently. The index opened the day down 11% for the past six months.
Shareholders of Broadcom, however, have been richly rewarded. They received more good news on Thursday, when the company announced it would increase its quarterly dividend by 11% to 59 cents per share in its upcoming fiscal year.
