By Zaheer Kachwala
(Reuters) – Broadcom forecast second-quarter revenue above Wall Street expectations on strong demand for its custom artificial intelligence chips from companies processing big data, sending its shares up more than nearly 9% after the bell on Thursday.
The chipmaker expects revenue of around $14.90 billion, compared with estimates of $14.76 billion, according to data compiled by LSEG.
Broadcom is seeing red hot demand for its custom artificial intelligence chips from companies looking for an alternative to the costly processors of market leader Nvidia as they rapidly expand their AI infrastructure.
Broadcom CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its AI semiconductors as hyperscale customers invest in custom AI chips for data centers.
Though Broadcom faces intense competition from Nvidia’s ethernet-like Infiniband products, it benefits from the expansion of AI data centers as one of the largest providers of advanced networking equipment.
“Result and outlook were good enough for investors,” said Summit Insights analyst Kinngai Chan. “Broadcom is much better positioned compared to its peers as its exposure in AI market is relatively more diversified with multiple AI ASIC customers.”
Application-Specific Integrated Circuit, or ASICs, are chips designed for specific tasks or applications.
Analysts expect Broadcom to benefit further from large tech companies moving away from off-the-shelf chips to in-house processors as computing needs for AI tasks get more complex and personalized.
Smaller rival Marvell Technology had also reported strong growth for its AI segment, but did not meet investors’ lofty expectations.
Broadcom reported revenue of $14.92 billion for the first quarter, beating estimates of $14.61 billion.
AI revenue for the first quarter surged more than 77% to $4.1 billion, driven by strong adoption of its custom-made accelerators.
Revenue in its infrastructure software segment rose more than 47% to $6.70 billion, while analysts expected $6.49 billion.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Arun Koyyur)
