(Bloomberg) — Broadcom Inc., a supplier of chips to Apple Inc. and other big tech companies, jumped to a $1 trillion stock valuation for the first time after predicting a boom in demand for its artificial intelligence chips.
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Sales of AI products will grow 65% in the fiscal first quarter, much faster than semiconductors’ overall growth of about 10%, the company said in a post-earnings conference call. The chipmaker also predicted that the addressable market for AI components it designs for data center operators would reach $90 billion by fiscal 2027.
Like Nvidia Corp., Broadcom is positioning itself as one of the biggest beneficiaries of the AI spending spree. And CEO Hock Tan said his company had gained two major new hyperscaler customers – the largest data center operators.
The stock rose 24% to $224.80 in New York on Friday, its biggest one-day gain since August 2009 – the month that pioneering company Avago Technologies Ltd. held its IPO. This company merged with Broadcom Corp. in 2016 to form the current company.
Investors have flocked to Broadcom shares this year, lured by AI optimism. The Palo Alto, Calif.-based company predicted it would derive more than $10 billion in annual revenue from this market, outpacing other areas of its business. Ultimately, that figure reached $12.2 billion in the last fiscal year.
AI revenue grew 220% during the year, fueled by demand for processors and networking components, Tan said. Demand for non-AI chips, meanwhile, will decline in the first quarter. Total sales will be $14.6 billion in the period through January, in line with estimates.
Tan built one of the chip industry’s most valuable companies through a series of acquisitions. It also built a software unit that approximates the scale of its semiconductor operations. This scope makes the company’s forecast a proxy for demand across a large part of the technology sector.
Earnings were $1.42 per share in the fourth quarter, excluding certain items, the company said. Revenue reached nearly $14.1 billion in the period ended November 3. Analysts had estimated earnings at $1.39 per share and revenue at $14.1 billion on average, according to data compiled by Bloomberg.
Data center providers rely on Broadcom’s custom chip designs and networking semiconductors to build their AI systems. The company also sells components for cars, smartphones and Internet access equipment. Meanwhile, its expansion into software includes products for mainframe computing, cybersecurity and data center optimization.