Broadcom Shares Surge 12% on Strong AI Chip Revenue Outlook

 

Broadcom (NASDAQ: AVGO) saw its shares soar 12% in premarket trading on Friday after the semiconductor maker issued a strong revenue forecast, boosting confidence in AI chip demand amid concerns sparked by a disappointing outlook from rival Marvell Technology (NASDAQ: MRVL).

Key Highlights:

• AI Chip Revenue Forecast: Broadcom’s CEO Hock Tan announced that the company expects $4.4 billion in AI chip revenue for the second quarter, reflecting the growing push from major cloud providers to reduce reliance on Nvidia’s (NASDAQ: NVDA) costly processors. Broadcom is the largest supplier of custom AI chips to Big Tech.

• Sector Confidence: The positive outlook from Broadcom could help revive a sputtering AI stock rally after concerns about excessive spending on AI infrastructure and low-cost breakthroughs by DeepSeek, a Chinese startup.

• Market Reaction:

  • Broadcom: Shares could add more than $91 billion to its market value if premarket gains hold, but would still fall short of its $1 trillion valuation.
  • Marvell: Shares rose over 1% on Friday after a 19.8% drop on Thursday, marking its worst day in over 20 years due to a weak revenue forecast.
  • Nvidia and Micron Technology (NASDAQ: MU): Both stocks rose 1.5% each on Friday.

• Analysts' Views: Morgan Stanley analysts noted that Broadcom’s results should provide relief amid general anxiety in the AI sector. Bernstein analysts added that Broadcom’s positive outlook signals that the AI trade may not be as “dead” as feared.

Broadcom's Diverse Strategy:

• Broadcom has diversified beyond chips with its $69 billion acquisition of VMware (NYSE: VMW), a cloud-computing firm.
• Its software revenue grew 47% in Q1 to $6.7 billion, making up more than 40% of total sales.

Valuation:

• Broadcom’s forward P/E ratio stands at 26.58, compared to 23.46 for Nvidia and 24.50 for Marvell.

Year-to-Date Performance:

• Broadcom's shares are down more than 20% this year, following a 100% increase in 2024. The Philadelphia Semiconductor index is down 10% in 2025, weighed down by higher tariffs under President Donald Trump's policies.