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Huawei CEO Admits Chip Technology One Generation Behind U.S. but Highlights Innovation Workarounds

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Huawei Technologies’ CEO Ren Zhengfei acknowledged on Tuesday that the company’s chips lag behind U.S. peers by one generation but emphasized that Huawei is overcoming this gap through innovative approaches such as cluster computing and compound chip designs. In an interview with the People’s Daily, the Chinese state media outlet, Ren stated that there is “no need to worry about the chip problem,” despite ongoing U.S. export restrictions.

Ren revealed that Huawei invests about 180 billion yuan ($25.07 billion) annually in research, with around a third allocated to theoretical research. He stressed the importance of theory for breakthroughs, noting, “Without theory, there will be no breakthroughs, and we will not catch up with the United States.”

U.S. export controls, introduced since 2019 to curb China’s access to advanced chipmaking technology, have limited Huawei’s ability to source high-end chips and manufacturing equipment. Nevertheless, Huawei’s strategy involves supplementing traditional chip advances (Moore’s law) with mathematical approaches, non-Moore’s law technologies, and cluster computing — where multiple chips or computers work together to boost performance.

Huawei’s Ascend AI chip series competes domestically with Nvidia, though U.S. restrictions bar Nvidia from selling its most advanced AI chips to China. Despite this, Huawei has developed AI systems like the “AI CloudMatrix 384,” linking 384 Ascend 910C chips in a cluster that, according to some analysts, can outperform Nvidia’s comparable offerings in certain metrics.

Ren also commented on perceptions of Huawei’s stature, saying the U.S. “has exaggerated Huawei’s achievements” and that the company still has work ahead to reach those high expectations.

This interview comes as top U.S. and Chinese officials resume trade talks in London, where technology export restrictions are key discussion points.

Broadcom Shares Slip as Revenue Forecast Underwhelms AI-Driven Expectations

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Broadcom shares declined over 3% in early trading on Friday after its third-quarter revenue forecast failed to meet the high expectations of investors who have been heavily bullish on chip stocks amid the ongoing artificial intelligence surge.

The Palo Alto-based semiconductor giant projected third-quarter revenue of approximately $15.80 billion, slightly above the analysts’ consensus estimate of $15.71 billion, according to LSEG data. However, analysts noted that expectations for Broadcom had already been elevated due to its critical role in AI infrastructure.

“High expectations drove a bit of downside,” said Bernstein analyst Stacy Rasgon, reflecting the sentiment that even marginally positive forecasts may not be enough in the current AI-fueled market climate.

Broadcom provides semiconductors to major clients like Apple and Samsung and supplies advanced networking hardware essential for AI data centers, where massive data transfers are required to power generative AI models. In addition to its networking chips, Broadcom also designs custom AI processors for large cloud providers, offering an alternative to Nvidia’s expensive off-the-shelf chips.

Despite its position in the AI supply chain, Broadcom remains exposed to global trade uncertainties, particularly around U.S. export restrictions aimed at limiting China’s access to advanced technology. “AVGO is ramping two additional customers, but they are still small. So the processor business will grow this year, but at a measured rate,” Morgan Stanley commented.

Rival Marvell Technology, meanwhile, offered a more optimistic outlook last week, forecasting stronger-than-expected second-quarter revenue driven by growing demand for custom chips supporting AI workloads in data centers.

Broadcom briefly crossed the $1 trillion market cap threshold in December, reflecting investor optimism about AI-related chip demand. Its shares have climbed roughly 12% year-to-date. However, its current valuation — with a 12-month forward price-to-earnings ratio of 35.36 — remains significantly higher than Marvell’s 20.63, according to LSEG data.

Broadcom Raises Revenue Forecast on AI Chip Demand but Shares Dip

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Broadcom delivered a stronger-than-expected revenue forecast for its third quarter, supported by robust demand for its networking and custom AI computing chips. The company projected Q3 revenue of approximately $15.80 billion, exceeding analysts’ average estimate of $15.71 billion according to LSEG data.

Despite the upbeat forecast, Broadcom’s shares fell 4% in after-hours trading. The stock had already climbed nearly 30% over the past month and around 12% for the year, leading some investors to view the forecast as insufficiently exceeding high market expectations. “Clearly, expectations were high coming into the print,” said Kinngai Chan, senior research analyst at Summit Insights Group.

The Palo Alto-based company plays a crucial role in the AI hardware ecosystem, designing custom processors and networking chips for major AI and cloud computing clients such as OpenAI and Google. Broadcom has begun shipping its newest networking chip, the Tomahawk 6, which doubles the performance of its predecessor and enhances data center efficiency for AI workloads.

Broadcom CEO Hock Tan highlighted the ongoing growth, noting that AI semiconductor revenue is expected to accelerate to $5.1 billion in the third quarter, marking ten consecutive quarters of growth. “Our hyperscale partners continue to invest,” Tan stated. In contrast, non-AI semiconductor revenue remains sluggish and near the bottom of its cycle.

For the second quarter, Broadcom reported total revenue of $15 billion, narrowly surpassing analysts’ estimates of $14.99 billion. Revenue from its semiconductor segment, which includes products for data centers and networking, grew 16.7% year-over-year to $8.41 billion.