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Broadcom Shares Surge on Strong AI Chip Demand and Positive Forecast

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Broadcom’s shares surged in after-hours trading on Thursday, jumping 14% following a solid second-quarter forecast that alleviated investor concerns over AI chip demand. The surge came after the company reported better-than-expected revenue and a strong outlook, especially in its AI semiconductor segment. The upbeat forecast contrasts with Marvell Technology’s disappointing outlook earlier in the week, which had spooked the market.

Broadcom expects revenue of approximately $14.90 billion for the second quarter, surpassing analyst estimates of $14.76 billion, according to data compiled by LSEG. CEO Hock Tan reassured investors that demand for its custom AI chips is robust, particularly from cloud computing companies seeking alternatives to Nvidia’s expensive processors. Broadcom anticipates second-quarter revenue from its AI semiconductors to reach $4.4 billion, driven by significant investments from hyperscale customers for data center expansion.

Broadcom is increasingly benefiting from the trend of large tech companies moving away from off-the-shelf chips toward custom-made processors to meet the growing complexity of AI tasks. CEO Tan revealed that the company now has four additional hyperscale customers working closely with it to develop custom chips, joining the three existing customers using its AI processors. This growing customer base has contributed to Broadcom’s estimated revenue potential of $60 billion to $90 billion by 2027.

Notably, Broadcom is working with OpenAI to finalize the first custom chip design to reduce its reliance on Nvidia. Analysts like Anshel Sag from Moor Insights & Strategy have noted that Broadcom is positioning itself as a key player for hyperscalers and other companies wanting to control their AI designs and costs by developing their own custom AI accelerators.

In terms of manufacturing, Broadcom is exploring Intel’s most advanced process, 18A, through test wafers. Summit Insights analyst Kinngai Chan highlighted that Broadcom is better positioned than many of its peers due to its diversified exposure to the AI market, with multiple AI-specific customers for its chips.

In its first-quarter earnings report, Broadcom posted revenue of $14.92 billion, surpassing analysts’ expectations of $14.61 billion. The company’s AI revenue saw a remarkable 77% increase, reaching $4.1 billion, driven by the growing adoption of its custom accelerators. Broadcom’s infrastructure software segment also experienced strong growth, with revenue rising by over 47% to $6.70 billion, beating the $6.49 billion anticipated by analysts.

Singapore Charges Three Men in Connection with Fraud Against Dell and Super Micro

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Singaporean authorities have added additional charges against three men involved in a larger investigation into server fraud, which may involve AI chips. The charges are related to fraudulent activities committed against tech companies Dell and Super Micro. According to court documents, the men allegedly misrepresented the destinations of the servers they purchased, falsely claiming that the servers would not be transferred to unauthorized third parties.

The police charge sheets indicated that the defendants made false representations regarding the ultimate consignee of the items, suggesting that they would not be diverted. Investigations revealed that the servers may contain Nvidia chips, though authorities have not confirmed if these chips are subject to U.S. export controls.

This case is part of an ongoing investigation in Singapore, which involves 22 individuals and companies accused of making false representations. Additionally, the United States is investigating whether DeepSeek, a Chinese company behind a highly publicized AI model, has been using U.S. chips prohibited from being sold to China.

The investigation also covers Malaysia, where the servers allegedly ended up, and authorities there are exploring whether any local laws were violated. Singapore has so far charged two suspects, Aaron Woon, 41, and Alan Wei, 49, with conspiring to defraud Super Micro in 2024. Their charges have been amended to include fraud against Dell. A third suspect, Chinese national Li Ming, 51, was also charged with defrauding Super Micro in 2023.

Authorities seized 42 devices, including phones, computers, and laptops, which are being analyzed by forensic experts. The investigation is still in its early stages, with prosecutors seeking bank statements to trace the movement of funds and planning to work with international law enforcement.

Marvell Technology Forecasts In-Line Q1 Revenue, Shares Drop 15%

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Marvell Technology (MRVL.O) predicted first-quarter revenue in line with Wall Street’s expectations, but its shares fell sharply by 15% in after-hours trading. Investors were underwhelmed by the forecast, as they had hoped for more substantial growth driven by the surging demand for artificial intelligence (AI) chips.

The AI chip market has seen booming demand, particularly for sector-leader Nvidia’s (NVDA.O) AI processors. Major tech companies like Microsoft (MSFT.O), Meta Platforms (META.O), and Amazon.com (AMZN.O) have been working to reduce their reliance on Nvidia by developing their own AI chips, a trend that has benefited companies like Marvell and Broadcom (AVGO.O).

“The earnings print was generally OK, but I believe investors were expecting more given all the bullish data points in the overall AI space and the ramp of custom ASICs (AI chips) with certain hyperscalers,” said Tore Svanberg, an analyst at Stifel Nicolaus and Co.

Marvell’s data center segment performed well, with revenue up 78% year-over-year to $1.37 billion in the fourth quarter, driven by increased demand for custom AI chips as businesses work to optimize their AI workloads. In December, the company also signed a five-year chip deal with Amazon that includes custom AI chips.

“We’re engaged, we expect revenue to grow, but obviously, it’s like anything, you’ve got to show you can do it, and you’ve got to show it consistently,” Marvell COO Chris Koopmans said, emphasizing the “sticky” nature of the Amazon deal.

Marvell has pledged to focus its investments on data centers, seeing them as the best way to capitalize on the AI boom. Data center revenues accounted for 75% of its total revenue in the most recent quarter. However, Koopmans added that Marvell had not yet experienced any impact from tariffs affecting its data center business.

Despite posting solid results, Marvell’s shares dropped to $77.65 in after-hours trading, following a year-to-date increase of over 83%. In contrast, its larger competitor Broadcom saw a stock jump of around 107%. Analysts pointed to concerns over geopolitical pressures, AI monetization, and the magnitude of Marvell’s earnings beat as factors contributing to the decline.

Marvell forecast first-quarter revenue of $1.88 billion, slightly above analysts’ expectations of $1.87 billion.