TLDR
- Broadcom reported stronger-than-expected Q1 results and Q2 outlook driven by AI chip sales
- CEO Hock Tan forecasts $4.4 billion in Q2 revenue for AI semiconductors
- Broadcom’s shares rose 12% in premarket trading following the announcement
- The company is well-positioned as a provider of custom AI chips as an alternative to Nvidia’s GPUs
- OpenAI is reportedly working with Broadcom to develop custom chip designs, reducing reliance on Nvidia
Broadcom shares jumped 12% in premarket trading on Friday following the company’s announcement of better-than-expected first quarter results. The chipmaker’s strong performance was largely fueled by growing demand for its artificial intelligence semiconductors.
The positive earnings report came as a welcome relief to investors amid concerns about AI chip demand. These worries had intensified after competitor Marvell Technology issued a disappointing forecast, triggering a sector-wide selloff.
Broadcom CEO Hock Tan provided an optimistic outlook during the earnings call. He projected revenue of $4.4 billion in the second quarter for the company’s artificial intelligence semiconductors.
This upbeat forecast is driven by hyperscale customers who are investing heavily in custom AI chips for their data centers. The demand for these specialized processors continues to grow as tech companies expand their AI capabilities.
According to CFRA Research senior equity analyst Angelo Zino, AI is “clearly what’s causing the beat” for Broadcom’s top-line performance. The company has positioned itself strategically in the AI ecosystem.
While Nvidia’s GPUs have dominated the AI infrastructure market, Broadcom has established itself as the leading alternative in custom silicon. This positioning has become increasingly valuable as major tech companies seek to diversify their chip suppliers.
Reuters recently reported that OpenAI is working with Broadcom to finalize its first custom chip design. This partnership aims to reduce OpenAI’s dependence on Nvidia’s processors.
Such collaborations highlight the growing trend of AI companies seeking more tailored chip solutions. Broadcom’s expertise in custom silicon makes it an attractive partner for these initiatives.
Despite the recent positive news, Broadcom’s stock has experienced volatility in 2025. While shares more than doubled in 2024, they have declined about 23% so far this year.
Investor confidence may be returning
Friday’s premarket surge suggests that investor confidence may be returning. Morgan Stanley analysts noted that “given the anxiety about AI conditions in general, these results should come as a relief.”
Bernstein analysts added that “perhaps the AI trade isn’t as dead as feared” and that amid market nervousness about AI, “Broadcom management’s view of the future is becoming even more positive.”
The strong performance has also had a positive effect on other chip companies. Nvidia, Micron Technology, Advanced Micro Devices, and Marvell all saw modest gains of between 0.4% and 1.7% in premarket trading on Friday.
Zino pointed out that while Broadcom’s custom silicon business has lower corporate gross margins compared to other segments, “this is a company that will continue to see those margins widen here over time.”
The analyst emphasized that over the next couple of years, the custom silicon business will be the primary driver of Broadcom’s top-line growth. This focus on specialized AI chips aligns with the evolving needs of the market.
Broadcom currently trades at a premium compared to some of its peers. According to data compiled by LSEG, the company has a 12-month forward price-to-earnings ratio of 26.58, compared to 23.46 for Nvidia and 24.50 for Marvell.
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