By Arsheeya Bajwa and Zaheer Kachwala
(Reuters) -Broadcom (AVGO) on Thursday forecast quarterly revenue that beat Wall Street estimates and predicted booming demand for its custom artificial intelligence chips over the coming years.
Shares of the Palo Alto, Calif.-based company rose 13% premarket Friday after CEO Hock Tan told investors on a conference call that he expects a revenue opportunity of AI in the range of $60 billion to $90 billion in fiscal year 2027.
Tan said three hyperscale customers are likely to deploy millions of AI chip clusters at that time.
Big tech is trying to reduce its reliance on expensive and limited AI processors made by leader Nvidia, helping Broadcom, which makes advanced custom AI chips for so-called hyperscalers.
Demand for Broadcom’s networking chips that move large amounts of data used by applications such as OpenAI’s ChatGPT has also increased, as companies double down on investments in GenAI infrastructure.
“Broadcom’s strong performance comes as no surprise. It is one of many companies benefiting from AI reinvigorating the global semiconductor industry, with AI-related revenue up by 220% this year,” said eMarketer analyst Jacob Bourne.
The company expects first-quarter revenue of about $14.6 billion, compared with an average analyst estimate of $14.57 billion according to data compiled by LSEG.
Analysts, however, have expressed doubts about the amount of Apple’s potential future business (AAPL), one of Broadcom’s most important wireless customers, as the iPhone maker works to design more of its chips in-house.
Apple’s plans will include switching to a local chip for Bluetooth and Wi-Fi connections starting next year, replacing some parts currently supplied by Broadcom, Bloomberg News reported Thursday.
Although the company faces intense competition from Nvidia (NVDA) Ethernet-like Infiniband products, Broadcom still benefits from the expansion of IA data centers as it is one of the largest providers of advanced networking equipment.
“Broadcom will continue to be a significant player in the custom AI ASIC market, alongside companies like Marvell, as Tier 1 hyperscalers continue to introduce their in-house chips,” said Kinngai Chan, principal analyst at Summit Insights .
Application-specific integrated circuits, or ASICs, are chips designed for specific tasks or applications.
Although hailed as a chipmaker, Broadcom has transformed itself into a technology conglomerate through buyouts such as the $69 billion acquisition of cloud computing company VMware. The infrastructure software segment grew 196% year-over-year to $5.82 billion in the fourth quarter.