Broadcom Shares Soar On Work With OpenAI To Create New AI Chip

Broadcom Inc. is helping OpenAI design and produce an artificial intelligence accelerator from 2026, getting into a lucrative sphere dominated by Nvidia Corp. Its shares jumped by the most since April. 

The two firms plan to ship the first chips in that lineup starting next year, a person familiar with the matter said, asking to remain anonymous discussing a private deal. OpenAI will initially use the chip for its own internal purposes, the Financial Times reported earlier.

Broadcom’s shares surged as much as 16% in New York trading on Friday, adding more than $200 billion to the company’s market value. Nvidia’s stock was down as much as 4.3% at $164.22, its biggest intraday decline since May. 

Chief Executive Officer Hock Tan made veiled references to that partnership on Thursday when he said Broadcom had secured a new client for its custom accelerator business. Tan said the company has secured more than $10 billion in orders from the new customer, which the person identified as OpenAI.

Accelerators are essential to the development of AI at big tech firms from Meta Platforms Inc. to Microsoft Corp. Bloomberg News has previously reported that OpenAI and Broadcom were working on an inference chip design, intended to run or operate artificial intelligence services after they had been trained. 

“Last quarter, one of these prospects released production orders to Broadcom,” Tan said, without naming the customer.

Tan had previously said that AI revenue for 2026 would show growth similar to the current year — a rate of 50% to 60%. Now, with a new customer that he said has “immediate and pretty substantial demand,” the rate will accelerate in a way that will be “fairly material,” Tan said.

“We now expect the outlook for fiscal 2026 AI revenue to improve significantly from what we had indicated last quarter,” he said.

Broadcom’s quarterly results initially drew a tepid reaction from investors, a sign they were anticipating a bigger payoff from the AI boom. After fluctuating in the wake of the report, the stock gained more than 3% during the conference call.

Sales will be about $17.4 billion in the fiscal fourth quarter, which runs through October, the company said in an earlier statement. Analysts had projected $17.05 billion on average, though some estimates topped $18 billion, according to data compiled by Bloomberg.

Expectations were high heading into the earnings report. Broadcom shares more than doubled since hitting a low in April, adding about $730 billion to the company’s market value and making them the third-best performer in the Nasdaq 100 Index.

Investors have been looking for signs that tech spending remains strong. Last week, Nvidia gave an underwhelming revenue forecast, sparking fears of a bubble in the artificial intelligence industry.

Though Broadcom hasn’t experienced Nvidia’s runaway sales growth, it is seen as a key AI beneficiary. Customers developing and running artificial intelligence models rely on its custom-designed chips and networking equipment to handle the load. The shares had been up 32% for the year.

During the call, Tan said he and the board have agreed that he will stay as Broadcom CEO until 2030 “at least.”

In the third quarter ended Aug. 3, sales rose 22% to almost $16 billion. Profit, excluding some items, was $1.69 a share. Analysts had estimated revenue of about $15.8 billion and earnings of $1.67 a share.

Sales of AI semiconductors were $5.2 billion, compared with an estimate of $5.11 billion. The company expects revenue from that category to reach $6.2 billion in the fourth quarter. Analysts projected $5.82 billion.

Other AI-focused chipmakers have stumbled in recent days. Shares of Marvell Technology Inc., a close Broadcom competitor in the market for custom semiconductors, plunged 19% on Friday after the company’s data center revenue missed estimates. 

Broadcom’s Tan has been upgrading the company’s networking equipment to better transfer information between the pricey graphics chips at the heart of AI data centers. As his latest comments suggest, Broadcom is also making progress finding customers who want custom-designed chips for AI tasks.

Tan has used years of acquisitions to turn Broadcom into a sprawling software and hardware giant. In addition to the AI work, the Palo Alto, California-based company makes connectivity components for Apple Inc.’s iPhone and sells virtualization software for running networks.