July 19, 2024

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Broadcom boosts revenue forecast for AI chips, reveals stock split

Broadcom boosts revenue forecast for AI chips, reveals stock split

Written by Arshia Bajwa

(Reuters) – Broadcom Inc raised its annual revenue forecast for chips that help power artificial intelligence by 10% on Wednesday, and announced a stock split to capitalize on its stock’s rise this year.

Shares of the Palo Alto, California-based chip maker rose 12% in extended trading.

The company expects $11 billion in revenue from AI-related chips in 2024, up from its previous forecast of $10 billion.

Broadcom makes advanced networking chips that help move massive amounts of data used by AI applications like OpenAI’s ChatGPT, making it one of the beneficiaries of companies investing heavily in prosperity.

Broadcom reported revenue of $3.1 billion from AI products during the second quarter.

The company, which has seen its shares rise more than 30% so far this year, after nearly doubling in 2023, will split futures shares 10-for-1, in an effort to make its shares more accessible to retail investors.

The revised trading is expected to begin on July 15.

The custom chip unit has also attracted orders from major cloud providers looking to reduce their reliance on expensive Nvidia processors. Broadcom is widely believed to make custom chips for Google and Meta.

Revenue from Broadcom’s semiconductor solutions segment, which includes its networks and custom chips, rose about 6% to $7.20 billion in the quarter.

“As the data center market transitions to AI servers, the upside for Broadcom is very high,” said Ben Bajarin, an analyst at Creative Strategies. “In many ways, (Broadcom) will be the second-biggest beneficiary of this shift, after Nvidia.”

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Revenue for the company’s infrastructure software segment more than doubled, thanks in part to its purchase of VMware.

Broadcom raised its full-year revenue forecast by $1 billion to $51 billion. It also raised its annual core earnings forecast and beat LSEG’s estimates for adjusted earnings per share and revenue in the second quarter.

(Reporting by Arshiya Bajwa in Bengaluru; Editing by Shilpi Majumdar)