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Watch out Nvidia—another AI bombshell just entered the villa.
Shares of semiconductor maker Broadcom soared 24.43% after the company reported head-turning AI revenue and a bullish outlook in its Q4 results yesterday evening. The glorious report sparked its best day of trading on record and a shiny new $1 trillion market value.
- Broadcom reported adjusted earnings per share of $1.42, topping expectations of $1.39.
- Revenue came in at $14.05 billion, a 51% increase from the year prior but slightly below the $14.07 billion projected.
- Broadcom said its AI revenue jumped 220% to reach $12.2 billion.
On a conference call, CEO Tan Hock Eng touted Broadcom’s “massive” AI opportunity over the next three years. He added that the chipmaker has three “hyperscalers” as customers, which are its massive cloud computing customers that are investing heavily in AI infrastructure.
He projects the firm’s AI chips will generate between $60 billion and $90 billion in revenue over the next three years.
Overall, Broadcom’s shares are up 107% this year.
The best AI play that flew under the radar
Let’s take a step back: What does Broadcom actually do?
While developing the powerful AI chips that run generative AI software is at the forefront of its business, Broadcom also makes other crucial but unglamorous hardware products such as data center switches and routers. It’s also gotten into software, too: Last November, for example, it acquired cloud computing firm VMWare.
Like some of the other hottest stocks of the past few years, the hype around artificial intelligence has turned this 63-year-old semiconductor manufacturing company into a new AI stock darling.
Fun fact: Broadcom’s ticker (AVGO) is a relic of its time as the company, Avago (it changed its name to Broadcom Ltd. after acquiring Broadcom Corporation in 2015).
While Broadcom’s returns over the past two years haven’t landed the company in the Mag 7 club, analysts are more bullish than ever given the huge demand for powerful AI chips needed to power generative AI tools like ChatGPT and Anthropic’s Claude.
- Bernstein analyst Stacy Rasgon noted the company “went out of their way to give investors a reason to dream” in a note today.
- He added that Hock might want to start shopping for a leather jacket, a reference to Nvidia CEO Jensen Huang’s signature look.
But Kingvidia is still No. 1 in the minds of other watchers, at least for now. “This remains our 2nd best AI play behind NVDA and we put them ahead of AI equal weights AMD (Advanced Micro Devices) and MRVL (Marvell Technology),” Morgan Stanley equity analyst Joseph Moore wrote in a note today, reiterating the firm’s overweight rating.—LB