Broadcom’s AI Chip Forecast Sparks Rally, Nvidia and AMD Miss Out
Broadcom (AVGO) sparked a big rally in the semiconductor space after saying there’s a $60 billion to $90 billion AI market by 2027.
Broadcom’s stock rose 20% on Friday, its biggest one day gain ever, while the PHLX Semiconductor Index (SOX) was up 2.6%.
Despite that rally, Nvidia (NVDA) and AMD (AMD) – the two leading GPU (graphics processing unit) makers – were left behind. Nvidia fell 2.3% and AMD 3.2%, the two worst performers in the semiconductor index. Broadcom’s comments have investors wondering if ASICs (application specific integrated circuits) are becoming the cost effective alternative to GPUs for certain AI applications.
Shift Toward Custom Silicon Gains Momentum
Broadcom’s comments suggest a shift in the AI market as hyperscale customers may prefer ASICs for generative AI workloads. Mizuho analyst Jordan Klein says companies like Meta Platforms (META) and Alphabet (GOOGL) will look to custom silicon to reduce costs and challenge Nvidia and AMD.
While GPUs will still be important for AI training, ASICs may take share for inference and application specific workloads. Broadcom and Marvell Technology (MRVL) – both ASIC makers – are the beneficiaries. Marvell’s stock rose 9.5% as investors get more interested in its ability to get a piece of the growing AI pie.
Melius Research’s Ben Reitzes notes that Broadcom’s comments mean continued investment in AI technologies and semiconductors across the board. But the stock performance divergence shows the market wants a more diversified AI chip ecosystem.
Winners Beyond Broadcom: Arista Networks Joins the Surge
Arista Networks Inc. (ANET) – an AI networking player – was up 3.8% on Friday. Broadcom’s comments mean AI networking which is 5-10% of AI silicon content today could grow to 15-20% in the future. That’s faster growth for AI networking vs ASICs or GPUs.
Arista is a low growth company and just guided 15-17% revenue growth for 2024. But Broadcom’s comments mean more for Arista and others in the space.
Key Insights:
Broadcom Gains Big: Stock jumps 20% with a $60-$90 billion AI market projection for 2027.
Nvidia and AMD Fall: Stocks drop as custom silicon chips challenge GPU dominance.
Networking Growth: AI networking projected to grow to 20% of AI silicon demand.
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