Hock Tan, CEO of Broadcom, says generative AI applications will boost demand for the company’s chips.
Chipmaker Broadcom (Stock ticker: AVGO) made a higher-than-expected revenue forecast for the July quarter. Its shares also rose in after-hours trading.
On Thursday, Broadcom (stock symbol: AVGO) reported adjusted earnings per share for the fiscal second quarter of $10.32, beating the Wall Street consensus estimate of $10.12, according to FactSet. Revenue was $8.73 billion, roughly in line with expectations of $8.7 billion.
Broadcom’s guidance was also above expectations. It provided a revenue forecast of $8.85 billion for the fiscal third quarter, compared to the $8.72 billion expected by analysts.
“Our third-quarter outlook projects year-over-year growth, reflecting continued leadership in the networking space as we power a calculated ramp into large-scale AI networks,” CEO Tan said in the earnings release.
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Shares of the chipmaker traded up 4.3% to $823.63 after the issue.
On the call with analysts and investors, Tan said Broadcom’s revenue path exposed to generative AI is expected to double this fiscal year since the beginning of the fiscal year.
Some of Broadcom’s chipsets showcase generative AI systems, which have been a popular investment topic this year. Technology ingests text, images, and videos in a brutal way to create content. Interest in this form of AI began with OpenAI’s release of ChatGPT late last year.
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Broadcom semiconductors are found in a number of categories, including networking, broadband, server storage, wireless, and industrial networking. Due to the broad base nature of its end markets, it can be seen as a benchmark for the rest of the industry.
Earlier this week, KeyBanc Capital Markets analyst Jon Vinh raised his price target for Broadcom stock to $820 from $720, and maintained an overweight rating, citing its lead in AI.
Broadcom shares are up 38% over the past 12 months, compared with a 16% gain for the iShares Semiconductor exchange-traded fund (SOXX), which tracks the performance of the ICE Semiconductor Index.
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