Broadcom is forecasting a substantial boom in its artificial intelligence chip sales over the next two years, a move that is expected to reinvigorate optimism regarding its potential to compete with Nvidia in the highly profitable AI chip market. The company is also projected to surpass earnings of $30 per share in fiscal year 2028, outperforming current Wall Street estimates.
This optimistic outlook follows Broadcom's revised AI chip revenue forecast. The company now expects AI chip revenue to reach approximately $115 billion in the fiscal year ending October 2027, an increase from its previous forecast of over $100 billion. This figure is then expected to double to roughly $230 billion in fiscal 2028. This growth is driven by the undiminished demand from major tech companies for AI infrastructure, with Broadcom's custom AI chips being utilized by firms like Meta Platforms, Google, and OpenAI.
Despite the strong AI chip forecast, Broadcom's shares were down over 1% in extended trading, though they recovered some earlier losses. The shares have gained about 6% this year, underperforming rivals and the broader semiconductor index due to concerns about AI spending and increased competition, such as Marvell's recent custom chip deal with Google. Broadcom's custom AI chip bookings topped $30 billion last quarter alone, with CEO Hock Tan confirming secured supply to meet the increased forecasts and ongoing customer demand. He also noted visibility into significant AI infrastructure deployments through 2028 for major clients like Anthropic (over 10 GW), OpenAI (over 5 GW), and Meta (3 GW).
For the third quarter, Broadcom's AI chip sales more than tripled to $16.7 billion, contributing to a total revenue of $29.59 billion, which exceeded analysts' estimates of $29.36 billion. The adjusted profit reached $3.32 per share, surpassing estimates of $3.24. However, the company's fourth-quarter revenue is expected to be about $34.8 billion, slightly below analysts' average estimate of $35.03 billion, indicating potential challenges from intensifying competition in the custom AI chip market.
