Street Calls of the Week
Investing.com -- Broadcom shares jumped in Friday premarket trading, driven by the chipmaker’s strong guidance for the current quarter and reports of its partnership with ChatGPT maker OpenAI.
Broadcom Inc (NASDAQ:AVGO) was up 7% in the premarket trade as of 04:15 ET (08:15 GMT).
For the three months ended Aug. 3, Broadcom announced adjusted earnings per share (EPS) of $1.69 on revenue of $15.95 billion. Analysts polled by Investing.com had forecast EPS of $1.66 and revenue of $15.82B.
Revenue from semiconductor solutions, its core business that houses its custom chips division, rose 57% versus the same period last year to $9.17 billion.
Sales at its infrastructure software segment, which includes cloud computing firm VMware, rose 17% versus the same period last year to $6.79 billion
For Q4, revenue was expected to come in at approximately $17.4B, beating estimates of 17.01B. The company also touted "growth in AI semiconductor revenue to accelerate" to $6.2B in Q4, above analysts’ expectations for about $6B.
Meanwhile, the Financial Times reported on Friday that OpenAI plans to launch its first in-house AI chip next year, aiming to ease pressure from soaring demand for computing power and cut its dependence on Nvidia.
The processor is being developed with Broadcom and is expected to begin shipping in 2026, according to the report. Broadcom CEO Hock Tan on Thursday pointed to a new customer securing $10 billion in orders, without naming the company.
The move mirrors efforts by Google, Amazon and Meta, which have also built custom chips to support AI workloads. The report said OpenAI intends to use the chips internally rather than sell them to third parties.
Commenting on Broadcom’s results, Morgan Stanley analysts said "upside to overall numbers is modest, but AI stays strong."
"More importantly, the company is putting a 4th AI customer into backlog, with the surprising forecast of $10 bn of incremental second-half revenue," they added.
Separately, Barclays analyst Tom O’Malley said Broadcom "is firing on all cylinders with clear line of sight for growth supported by significant backlog."
(Yasin Ebrahim contributed to this report.)