Broadcom stock jumps 21%, hits four-year high on AI boom to top $1 trillion market value for first time | Stock Market News

Broadcom Inc. surged to a $1 trillion market valuation for the first time on Friday, December 13, after predicting a boom in demand for its artificial intelligence (AI) chips. The chip supplier for Apple Inc. and other big tech companies predicted sales of AI products would gain 65 per cent in the first quarter, far faster than its overall semiconductor growth of about 10 per cent.

Broadcom Chief Executive Officer (CEO) Hock Tan Hock said the addressable market for AI components it designs for data centre operators, would reach as high as $90 billion by fiscal 2027, more than four times the market’s current size. The stock rose as much as 21 per cent to $218.29 after markets opened in New York on Friday, its biggest share-price rally since March 2020.

The AI chipmaker also forecast first-quarter revenue above estimates. Like Nvidia Corp., Broadcom positions itself as a major beneficiary of the AI spending frenzy. Broadcom won two major new hyperscaler customers — the biggest operators of data centres. According to Bloomberg, investors have piled into Broadcom’s stock this year, lured by AI optimism. 

The Palo Alto, California-based company had predicted that that market would generate more than $10 billion in annual revenue, outpacing other parts of its business. Ultimately, the number reached $12.2 billion in the last fiscal year.

Tan said AI revenue grew 220 per cent during the year, fueled by demand for processors and networking components. Demand for non-AI chips, meanwhile, will be down in the first quarter. Broadcom’s total sales will be $14.6 billion in the period, which runs through January, which is in line with estimates.

The company said profit was $1.42 a share in the fourth quarter, excluding some items. Revenue rose to nearly $14.1 billion in the period ending November 3. According to data compiled by Bloomberg, analysts had estimated earnings of $1.39 per share and revenue of $14.1 billion on average.

Data centre providers rely on Broadcom’s custom-chip design and networking semiconductors to build their AI systems. The company also sells components for cars, smartphones, and internet access gear. Its push into software, meanwhile, includes products for mainframe computers, cybersecurity, and data centre optimization.

Broadcom’s semiconductor division had revenue of $8.23 billion in the fourth quarter, up 12 per cent. Software sales grew nearly 200 per cent to $5.82 billion. The company is much larger than it was a year ago, partly because of its acquisition of VMware Inc., which it bought for roughly $69 billion.

Apple is a top customer of Broadcom, which provides components for the iPhone. Bloomberg News reported earlier that Apple would start switching away from a key Broadcom wireless chip next year. However, Tan said that Broadcom continued to be highly engaged with Apple on multiyear road maps for various technologies and remained open to acquisitions.

Broadcom’s shares are up more than 60 per cent so far this year, while Nvidia’s stock has more than doubled as of its last close. This eclipses gains in major cloud companies, with Microsoft up about 11 per cent this year and Alphabet – seen by analysts as Broadcom’s biggest custom chip customer – about 40 per cent higher.