Chip design company Broadcom predicted on Wednesday that its artificial intelligence chip revenue is expected to exceed $100 billion by 2027, reflecting a sharp rise in demand for custom chips in a market dominated by Nvidia. The company's stock rose nearly 5% in after-hours trading, while it announced a new stock buyback program of up to $10 billion, which will last until the end of the year. Major tech companies such as Alphabet, Microsoft, Amazon, and Meta are expected to invest at least $630 billion this year in building AI infrastructure, boosting demand for chips, servers, storage, and networking equipment from companies like Broadcom.

CEO Hock Tan stated during the earnings call: "Our visibility for 2027 has improved significantly. In fact, today we already see that AI chip revenue is expected to exceed $100 billion by 2027." According to data compiled by LSEG, Broadcom expects second-quarter revenue to be approximately $22 billion, higher than the analyst consensus estimate of $20.56 billion. AI chip revenue for the quarter is forecasted to be $10.7 billion. Broadcom provides semiconductors and infrastructure software and typically does not design complete AI chips itself. Instead, it collaborates with customers like Google to develop their Tensor Processing Units (TPUs) and works with ChatGPT maker OpenAI on their internal custom processors. The company's engineers help translate early designs into physical chip layouts that can be manufactured by foundries like TSMC.

D.A. Davidson analyst Gil Luria said: "Broadcom's guidance for the April quarter and for 2027 is very encouraging. While the company typically guides only one quarter at a time, visibility into results more than a year out indicates significant demand growth." Tan noted that Broadcom expects to provide AI startup Anthropic with 1 gigawatt worth of TPUs in 2026, with demand increasing to 3 gigawatts in 2027. Broadcom aims to ship OpenAI's first AI chip in 2027 and provide chips worth over 1 gigawatt. The major customer chip volumes disclosed by Broadcom on Wednesday show it is signing deals approaching the scale of leading AI chip companies. For example, Nvidia disclosed last week that it sold 5 gigawatts worth of chips to OpenAI, while Advanced Micro Devices has signed deals with OpenAI and Meta for up to approximately 6 gigawatts.

Another revenue source for Broadcom is Meta. Tan stated that reports about a slowdown in the social media company's AI chip business are incorrect, noting that this is part of Meta's efforts to design more of its own custom chips to reduce reliance on external suppliers. Regarding Meta's custom chips, Tan said: "Meta's custom accelerator, the MTIA roadmap, is still active and well. We are shipping it now." Last month, Broadcom said that based on its die-stacking design technology, it expects to sell at least 1 million chips by 2027, marking a new product and a sales target that could represent a revenue stream worth tens of billions of dollars. Growth in Broadcom's infrastructure software segment slowed to about 1% in the first quarter, reaching $6.8 billion, while analysts had expected 2.6% growth to $6.88 billion. Last month, AI chip designer Nvidia reported better-than-expected results for the January quarter and forecast current-quarter revenue above market expectations. Nvidia dominates the accelerator market, providing chips essential for training and running AI models, but Broadcom has emerged as a strong competitor, offering its specialized custom-designed chips as an alternative. Broadcom said its first-quarter revenue rose 29% to $19.31 billion, exceeding the analyst consensus estimate of $19.18 billion. Its adjusted earnings per share were $2.05, beating the expected $2.03. In the quarter ended February 1, its AI revenue more than doubled to $8.4 billion, driven by demand for custom AI accelerators and networking.