By Zaheer Kachwala and Max A. Cherney
(Reuters) -Broadcom forecast second-quarter revenue above Wall Street expectations on Thursday due to strong demand for its custom artificial intelligence chips from companies processing big data.
Its forecast eased some of the concerns about the thirst for AI chips after Marvell Technology’s spooked the market on Wednesday. Broadcom shares, which had closed down 6%, surged 16% in extended trading after the results.
The chipmaker expects revenue of around $14.90 billion, compared with estimates of $14.76 billion, according to data compiled by LSEG.
Broadcom is seeing red-hot demand for its custom artificial intelligence chips from cloud computing companies looking for an alternative to the costly processors designed by Nvidia as they expand their AI infrastructure.
Broadcom CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its AI semiconductors as hyperscale customers invest in custom AI chips for data centers.
Though Broadcom faces intense competition from Nvidia’s ethernet-like Infiniband products, it benefits from the expansion of AI data centers as one of the largest providers of advanced networking equipment.
“Result and outlook were good enough for investors,” said Summit Insights analyst Kinngai Chan. “Broadcom is much better positioned compared to its peers as its exposure in AI market is relatively more diversified with multiple AI ASIC customers.”
Application-Specific Integrated Circuit, or ASICs, are chips designed for specific tasks or applications. Designing and manufacturing an ASIC helps companies save the amount of energy chip use and boost performance.
Broadcom is one of several companies that is evaluating Intel’s most advanced manufacturing process, known as 18A, Reuters reported on Monday. It has run test wafers through the Intel factories that evaluate portions of chips, not complete designs.
Analysts expect Broadcom to benefit further from large tech companies moving away from off-the-shelf chips to in-house processors as computing needs for AI tasks get more complex and personalized.
Smaller rival Marvell’s results had failed to meet investors’ lofty expectations, while Nvidia’s earnings last week indicated there was no end in sight to the AI boom.
Broadcom reported revenue of $14.92 billion for the first quarter, beating estimates of $14.61 billion. AI revenue for the first quarter surged more than 77% to $4.1 billion on strong adoption of its custom-made accelerators.
Revenue in its infrastructure software segment rose more than 47% to $6.70 billion, while analysts expected $6.49 billion.
(Reporting by Zaheer Kachwala in Bengaluru and Max A. Cherney in San Francisco; Editing by Arun Koyyur)
