Broadcom has seen its stock surge in recent weeks after the company released a blockbuster earnings report that showed a 220% increase in custom-AI-chip revenue compared to last year. The company’s market value now exceeds $1 trillion, making it crucial for companies seeking alternatives to Nvidia’s AI chips.
The rise of artificial intelligence and the computing power it requires is bringing new attention to under-the-radar companies like Broadcom. According to Morgan Stanley analysts, designers of custom AI chips are headed into a growth phase, with Broadcom leading the charge.
Most tech companies don’t have in-house teams of silicon and hardware experts, making Broadcom’s custom chip offerings attractive alternatives to Nvidia’s products. The company is designing and selling application-specific integrated circuits (ASICs), which are used by companies like Amazon Web Services (AWS) and Google for their AI needs.
Morgan Stanley analysts forecast the market for ASICs to nearly double to $22 billion next year, with growth driven in part by AWS’ Trainium AI chip. Broadcom is helping make this chip, as well as other custom chips for Google’s Tensor Processing Units.
While Amazon and Google dominate the value of chips in use, other companies like OpenAI, Apple, and ByteDance are also developing chips with Broadcom. The analysts believe that custom chips can offer more value in terms of performance per cost, making them attractive to tech companies looking to negotiate better deals with Nvidia.
However, it’s unlikely that custom chips will ever fully replace Nvidia GPUs. Instead, they may provide greater bargaining power for cloud service providers like AWS and Google. Analysts see Broadcom as a key player in this emerging market, which is expected to continue growing in the coming years.
Source: https://www.businessinsider.com/broadcom-nvidia-custom-ai-chips-asics-2024-12