Broadcom raises AI chip forecast as Big Tech keeps writing bigger checks

Broadcom on Wednesday forecast strong AI chip sales for the next two years, offering fresh evidence that Big Tech's appetite for AI infrastructure remains undiminished as investors scrutinize returns on massive spending.

Shares of the Palo Alto, California-based company were down over 1 percent in extended trading, recouping some earlier losses.

They have gained about 6 percent this year, significantly underperforming rivals and the broader semiconductor index, as AI spending concerns and increased competition persist, including Marvell's recent custom chip deal with Google.

Broadcom, whose custom AI chips are used by companies including Meta Platforms, Alphabet's Google and OpenAI, said it now expects AI chip revenue of about US$115 billion (HK$897 billion) in the fiscal year ending October 2027, up from a prior forecast of over US$100 billion. The company expects that to double to roughly US$230 billion in fiscal 2028.

The outlook highlights how AI spending is broadening beyond Nvidia's costly processors, benefiting suppliers such as Broadcom that provide both custom chips and the networking components that tie AI systems together. As Big Tech races to build AI infrastructure, bookings for Broadcom's AI chips topped US$30 billion last quarter alone.

CEO Hock Tan told analysts Broadcom has secured enough supply to support the higher forecast for next year, while customer demand continues to mount. He said the company has visibility into additional AI infrastructure deployments through 2028, including more than 10 gigawatts for Anthropic, over 5 GW for OpenAI and 3 GW for Meta.

"That is committed capacity, not aspiration, and it closes most of the gap to what the market wanted," said Patrick Moorhead, CEO of analyst firm Moor Insights & Strategy.

Fourth-quarter revenue is expected to be about US$34.8 billion, below analysts' average estimate of US$35.03 billion, according to data compiled by LSEG.

AI chip sales more than tripled to US$16.7 billion in the third quarter, lifting Broadcom's total revenue to US$29.59 billion, which beat estimates of US$29.36 billion. Adjusted profit came in at US$3.32 per share, compared with estimates of US$3.24.

Reuters

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